Thinking of buying Z1 and been reading the manual. The manual states when the Preout is set to Sub Woofer, the high pass filter settings are ONLY work for the front speakers. Does anyone know if this is correct? What about the high pass filter for the rears?

Depends on whether you're using the rear output or the sub output for the sub signal. If you're using the sub output to feed the sub amp then the highpass filter will work on both the front and rear outputs.