"How do you get surround sound from 2 channels. By synthesis?"
Actually Metralla every stereo disc has surround information on it, all you need to do is study a little about the pick up patterns of microphones and mic arrays.
Also realise that all reverb, and delay algorithms are modeled for 360 degrees, not 180, which is all two channel has to offer.
This to me IS the big issue with digital and why it has a noticeable brightness to it when played in 2 channels, there is information compressed onto the soundstage, and since it is room reverberation, or 360 degree delay processing, or just out of phase noise, this information when not moved to its rightful place in the soundfield (rear channels) will negatively impact the spectral balance of playback. A good example is any live albome with an active crowd, most of these recordings are edgy because the crowd is not mic'd and the off axis response of the microphone and the quantity of them, plus room tone and on and on, gets placed between you and the subject, click on surround and the subject (singer etc) smoothes out immensely, your emmerssed in the crowd and all that "noise" is no longer smashed into the front stage, messing up the performer.