SeaBear,
In response to your question - I think that the rear surrounds will only sound better for the reasons posted above, because they'll be free to breathe etc. Also, it should be considerably more convincing in your set-up than in mind, because the rears are almost literally on top of me when I sit on the couch. I "fixed" this by pointing the speakers up towards the ceiling, so that I get reflected sound which comes down at me, and avoids the problem of the sound shooting right over my ears (only to be reflected by the front wall and sound like it is coming from there) and it also avoids the "in your face" sound of SPL hitting you in the back of the noggin.
In my set-up, a lot of the subtlety gets lost because of the proximity of the rear surrounds. It still helps to fill out the back of the room, but it is far from ideal. Your potential set-up, though, is much closer to the ideal, so that "wrap around effects" actually wrap around you, rather than wrap over you.
Bren - classic description of the various DSPs. I can't listen to any of them at all either. I find them to be so, well, artificial... And they seem to do some graphical eq'ing too, making most of the music/source sound tinny or the room sound too harsh. I like the Dolby PLII and DTS Neo:6 stuff though, to get some sound "around" me. Although, during parties, I tend to like the 7 speaker stereo because I can turn all 7 speakers on quietly without having any one part of the room too loud.
