When the 950 locks on to the digital signal, it lists the format of the signal, not the processing that it is applying. In some cases, the two are identical (Dolby Digital 3/2.1 may be processed using Dolby 5.1 if you don't have surround back processing to add to the mix, for example).

Dolby 2.0 is just that - a digital audio signal containing only two channels of data. The source signal does not have any surround component, and Dolby Digital processing should yield only stereo. If Pro Logic II processing is applied, the results of that will vary. If the original recording that is being broadcast in Dolby 2.0 included some steering for Pro Logic processing, then you will likely get a surround experience ranging from fair to very good (depending on the nature of the steering data and of the program in general). If the signal lacked any steering, the old Pro Logic processing would tend to collapse everything to the center channel. Pro Logic II is a good bit "smarter" than Pro Logic, so it is much less prone to collapsing, but it will probably also have a much harder time generating surround data from such a source, making the results seem more like stereo.

For what it's worth, the way I've been using my 950 (which has worked out very nicely for me) is a process that I think of as "teaching" the 950. I don't recall what I've done as far as setting a default for each input in the menu - in fact, I think I've left those all on their defaults. Instead, as I come across each typical signal format, I select the surround mode that I prefer for that format. DVD's are generally the easiest, as you have Dolby 2.0, Dolby 5.1, and DTS as the big three. In every case, I apply some form of surround back processing, which is typically CES. When I first came across a Dolby 2.0 soundtrack, I set the 950 to PLIIC+CR. From that point on, unless I change something, the 950 always reverts to PLIIC+CR for Dolby 2.0. The cable box is potentially a bit more complicated: I have analog cables connected, which we use most of the time because the audio delay generated by the cable box and 950 in turn when channel surfing irritates my wife, but I also have a digital audio cable connected. The analog is simple to handle - it always uses PLIIC+CR (although I did also tinker with PLIIM+CR some). Digital, however, may use one of three different signal formats: PCM (for analog audio converted to digital by the cable box), Dolby 2.0, and Dolby 5.1. Dolby 5.1 of course uses Dolby Digital processing, plus CES. For both Dolby 2.0 and PCM, I selected PLIIC+CR the first time I came across them and have left them that way, so the 950 always reverts to them.