Lin,
I'm glad you're staying with 2 channel and recognize the stereo image.
Regarding use of the word "stereo", the commonly used term instead is now "audio". Its not we audio/stereophiles that I was referring to, but the overall market, so please don't take offense. Use of terms and sales of HT/MP3 versus 2 channel is obviously moving towards home theater, MP3 variants, and automotive sound, while use of the term audio regardless of how the word "stereophonic" was derived. One of my points was that the population never "got" the whole stereo imaging concept and now that we've moved away from using the word stereo, the idea will be further buried.
Biaural recording/playback in theory would provide the best possible imaging. With all the earbuds/headphones used with MP3 this should be much more popular than it is. Without this technique there is no real image for the earbud/headphone user, so recognition of imaging is lost on a population that were largely unaware of it to start with. And the other popular use of MP3, all those little plug in boom boxes of sorts are too small to image unless you live in a dog house.
In room creation of the 3D image is easier with stereo than with additional channels. I certainly do recognize that if done right more channels (information) would provide a better defined image, but it's too complex and inflexible in nearly all instances. First, the recording studio has more channels to mix into and balance with HT (and if the history of 2 channel is any guide there's little chance of them consistently getting it right with the extra complexity of additional channels). The poor job of studio work alone has caused undetermined confusion in understanding what stereo really is all about. Secondly, for HT to work correctly the speakers must be in proper positional relationship with each other versus stereo that "automatically" would have the 2 speakers side by side*. Most residential rooms do not allow for this strict compliance for HT. This was the downfall of the Klipschorns when stereo was popularized, so if Klipsch had a problem finding two proper adjoining walls, think of the challenges involved trying to appropriately locate 5 - 7 speakers. Thirdly, due to the cost of the additional channels of amplification and speakers, quality typically is badly compromised. The THX standards (a well thought out HT provision) are rarely followed or even known. Fourth, in order to achieve proper listening balance between 2 speakers you need only to sit between them* but for HT you must sit in a single spot. With multiple listeners most, unless a very large room is provided, will invariably get an unpleasant "ear full" of one channel or another. So again the concept of imaging will continue to be lost on most folks.
*Yes, I know about the "sweet spot" and enjoy it greatly myself in "the" chair in my mancave and utilize proper speaker/listening positioning (I follow the Cardas formulas), but proper setup for HT is for the average user unrealistically restrictive. 2 channel can be enjoyed (not optimally) by just having the speakers side by side along one side of the room and sitting somewhere opposite them. You just can't do that with HT. Besides until 3D viewing becomes more prevalent (or we grow eyes on the sides/back of our heads) we are a forward oriented species, so most entertainment will be presented that way and the amount of rear channel information will remain minimal.