David,

In Denon's direct mode, a signal is actually sent to the sub AND the fronts.

As for simulated multi-channel, I now find that it works very well on all of the recordings I've heard. My experience is that you have to really watch the volume. If Raven Manor Cinema is very reverberant, turning on multi-channel very loudly will destroy the imaging due to high SPL reflections. My sweet spot happens to be at the exact interface between the direct field and reverberant field in my room. So half of the sound volume that I experience is due to direct sound and the other half is due to reflected. This is part of the reason why I need what some may call drastic toe-in. If I didn't have this much toe-in, the majority of the sound reaching my ears would be reflected and this would hurt imaging and intelligibility.

So you may want to try simulated multi-channel with the volume turned down and also experiment with toe-in of your fronts. I know that for you there's a fine line for toe-in because you have a multi-seat home theatre. But when you are the solitary listenener, you may want to toe-in more. And as I posted before, multi-channel may actually improve the frequency response of your listening environment.