I have to agree with Milkweg here - there is a cetain amount of digital finess required to get the best out of Dolby headphone and anyone who just inputs stereo into it will most likely come away pretty disappointed. The original discussions subsequent to the Foobar plug-in being made available came to the conclusion that at least 4 channels need to be input into the Dolby Headphone DSP for it to work properly. In my own experiments I concur with those conclusions.
Where I would differ slightly from Milkweg is that after very extensive testing, I actually prefer the relative simplicity of converting the stereo to 4 channels rather than 6. In the end though, it's a matter of different flavours - I just found the 4 channel conversion to be particularly well suited to orchestral music.
In any event, so far as my understanding is concerned, the stereo to 4 channel conversion is about as basic as it comes - it just doubles up the channels so you have the left both front and rear and the right both front and rear. It doesn't have to derive anynew channel material that was never there to begin with. It's just that the Dolby Headphone algorythm is designed to accept either 16 bit or 32 bit floating multichannel input, so that' s just the way it is. In the end, the result speaks for itself. I couldn't use headphones without it any more.
If you just feed Dolby Headphone two channels, then the result is very thin, distant and emasculated sounding. Also, Dolby Headphone in Foobar (or presumably anything) won't work if you throw anything at it with a sample rate higher than 48 khz. A pity - I wish it would work at 96 khz, since it would mean I don't have to downsample my masters prior to running them through Foobar.