Can a high end sound from mid-level gear?

Yes it can to whatever degree the system will provide. The gear matters some, but from my experience things like room accoustics, seating position and speaker placement matter a lot more than how good the gear is.

Spatial effects are quite separate from sonic fidelity, and can be produced with lousy-sounding equipment. My first experience with stereo was simultaneous AM and FM broadcasts on WQXR New York using commonplace "table" radios. Lousy fidelity, but the stereo effect was there.

"Can a three dimensional soundstage be achieved on any gear, or is it limited to high dollar equipment?"

Not with ANY gear, but also not limited to the most expensive stuff either. Quite a spectrum exists, with definite but only partial and imperfect correlation between soundstaging performance and increasing price.

Three factors dominate soundstage:
1) the recording
2) the speakers
3) interaction between the speakers and the room

Of these, the speakers themselves are probably the least important. You have a much better shot at good imaging/soundstage with mediocre speakers set up well than with expensive speakers set up poorly.

Sugarbie & Pabelson,
have it so right. A bit broad but I hear many systems in my job and so often a mid level system set up with care and patience to get it working right will crucify a megabuck system which has been dumped in place.
My diy room treatments have cost a minute fraction of the price of my gear and have taken the soundstaging to scary levels.
Getting the mains, isolation and placement right can ? was going to say save you a fortune (nope, it's cost me a fortune) but at least I know I'll be hearing the benefits of any further upgrades.

Not sure about the states but over hear, ny cheap tuner can be really scary with some of the BBC's broadcast - makes me wonder why I spent so much on turntables at times.

Rgds Simon