Pro-Logic! There! Couldn't remember it and all the Googling for "stereo to surround" etc didn't have it come up for some reason.
There's a lot of other competing solutions when you go "back in time" as well, and there actually is "Dolby Stereo" but it doesn't exist for consumers (if you're bored: https://en.wikipedia.org/wiki/Dolby_Stereo - if you read down enough it eventually does "grow into" Dolby Surround and later the consumer-facing Pro Logic).
When you set the windows mixer to 8 channel, windows will pad whatever the application outputs with silent channels if necessary to make it 8 channel.
If the application/source doesn't provide said channels, yes. It acts as a "straight thru" - so 2ch input with 7.1 output map you get 2ch to L/R and everything else is null. Microsoft doesn't pay to licence any matrix upmixing software, however many soundcards include such functionality in their drivers.
Dolby pro logic II requires 2 channel input
Pro Logic II can accept matrix encoded 2ch, "straight" 2ch input, or in the case of "extended" II (e.g. IIx, IIz) can accept 5.1 (or 7.1) inputs as well (to provide 6.1-9.1 output, as applicable). It will properly unpack matrix'd content through its matrix, and (per spec) should provide better channel separation while doing it (of course, it doesn't change that the source material's channel separation is whatever it is, so whether or not this is of real value is another question entirely).
Pro logic is also optional with 2 channel audio, you don't have to use it with dolby headphone.
My understanding is the Dolby Headphone package only accepts a multi-ch input for downmix/processing, so if you have a "straight" 2ch signal and want to enable Dolby Headphone, the decoder will run Pro Logic II (or on later iterations, IIx or IIz) internally to create that multi-ch source for the Dolby Headphone package to work on. Same applies for Lt/Rt mixed content, however in that case it will properly unpack the matrix encode before applying its DSP. This is how competing technologies work as well (or they exclusively require the source to originally be in multi-ch), and Dolby's marketing literature points to a similar cooperation between Pro Logic II and Headphone, although is quite short on specifics. If you have a "native" multi-ch signal (e.g. 5.1 output from a game or DVD) there is no Pro Logic II unless you're using IIx or IIz for "7.1" output.
In practice this does mean you can send 2ch into Dolby Headphone, and that its just taking care of everything behind the scenes, but if given the choice between starting out with 2ch and a multi-ch source, I'd take the multi-ch source on the assumption that it's either A) properly mixed/mastered for that (like a movie) or B) rendering the additional channels for that (like a game) as opposed to downmixing (or giving up outputs) and then trying to work back from that point.
Matrix encoded content doesn't really exist anymore, so I don't see the point of pro logic.
"Its older than 5 minutes, it doesn't exist and never did!"
Surprisingly enough, matrix content is still very common even today, and you may not even notice it - any stereo downmix from a Dolby or DTS surround-sound source will generally be provided as Lt/Rt (matrix encoded) for legacy compatibility (this is a requirement for Dolby decoders, and very common, but not universal, for DTS-supporting equipment as well, although that doesn't mean it is enabled by default). Some games implement Pro Logic II internally as well, providing native Lt/Rt outputs (this is especially common on console games). And finally, some relatively newer movies even include a studio-mixed matrix stereo track on their home releases, primarily targeting headphone or late-night listening (Wall-E is an example). Pro Logic I can also be applied to "straight" stereo sources, although results will vary from source to source, setup to setup, and person to person in terms of "how good is it?" The basic Pro Logic matrix does a pretty good job with typical stereo though, especially TV/cinematic content that has more conventional mastering. For Dolby Headphone, matrix-encoded content will be properly handled through Pro Logic II internally.
If you feed dolby headphone a stereo signal, it will try to recreate what things would sound like if it were playing through just the front two speakers of a surround sound system. This is functionally equivalent to a crossfeed. Both are trying to recreate what stereo speakers would sound like at that point.
Crossfeed is simply attempting to "spoof" or "recreate" the ITD, with no consideration of HRTF or other DSP to try and recreate a given acoustic setting. Dolby Headphone relies on HRTF and its own proprietary FIR filters (and these are never "defeated") which are based on a few acoustic models (I think they're up to 3 or 4 now) that try to simulate sound in a specific environment (Dolby says they're based on in-room response of some idyllic speaker system). They are not "functionally equivalent" as a result. Also, to wit, there is no "universal crossfeed" - different manufacturers/designers implement crossfeed in different ways on different amps or in different software packages, with some including equalization as well, while Dolby Headphone is meant to be consistent across implementations as its a pre-packaged DSP routine.