I've been messing with the settings and have found that the headphone settings are relatively perplexing. Essentially I seem to notice what I presume to the be the Dolby Headphone mode regardless of whether the surround setting is set to "DH1" or "Stereo". The only thing that seemingly sets my mode is when I swap the surround mode between "Headphone Stereo" and "Dolby Headphone" with Dolby sounding like it was recorded in a much larger room and with softer volume levels. Swapping back and forth for A/B tests didn't even show any difference as to whether DH1 was set or not.

While I need to give it a bit more critical listening Dolby Headphone only seems to make any real difference with Dolby Digital encoded material. Analog, stereo material matrixed out with PLII doesn't seemingly change much. Overall I'm also finding the stereo mode to just plain sound better. It's louder, feels more localized around a left-right soundstage, and doesn't sound like the dialogue is 30' ahead of me in an empty warehouse. As I said, I still need to give my listening some time.