Kijanki,
I've implemented oversampling and dithering algorithms in software for both commercial and federal imaging applications. Less familiar with application in audio, but I suspect it is analogous.
I suspect it can make digital sound smoother and more acceptable maybe to an analogue lover, but I know that it cannot add detail that was lost upstream, as you have correctly pointed out before.
That is one of the reasons I hesitate to spend a lot on a CD player, I believe a lot of it is valid trickery played to achieve a particular sound.
It's the best you can do if that is the sound you want, but I would agree with Albert that it will never completely equal or surpass the detail possible with analog source, at least technically on paper.
Despite the clear technical limitations, I still find that most well recorded CDs meet my listening needs on my system (which I have tuned considerably as well) just fine, even though I know some more bits of real information in that stream could certainly never hurt.
I am of the long time opinion that the value in many high end CD players is providing a certain sound that someone is looking for, but it is not required just to get the best sound possible off off a CD in terms of information content.
As a result, I still live happily with my oversampling Denon player/recorder, whose sound matches my Denon phono cartridge quite well.