First there was the assertion that the stereo signal gets mixed down to mono, instead the information is transferred to both a mid-channel and a side channel (and calculating the offsets renders a stereo signal with no loss). It's a more elegant way of representing the same information. Also, the tiny delays are not discarded in favor of the "mono" signal, though some signals do become masked by others because of psychoacoustic modelling - a process that is separate from joint stereo. A proper implementation does not use the Intensity Stereo (IS) process you describe in favor of the Mid-side Stereo (MS) and the results are markedly different.
Well I don't know what to tell you, but I can definitely hear a difference in soundstage between the two formats with nearly every song. Maybe it's just a side effect of something else but I can definitely hear it.