Slvrtravel:
I have a lot of experience with the Lex Mc12b and can tell you it greatly helps setting up a home theater. My approach has been to take a quality 2 channel system and expand it to 7.1 surround. I use the Mc12b and Classe amps. The Mac 7 channel amp sounds usefull for the surrounds (center, two sides, two rears) and either two monoblocks for the L and R, or the remaining Mac channels for the fronts. Film and surround music are created from very different beginnings. Film mixes are designed for specific placement of sounds. Centers are very important especially for very wide screens, since listeners off to the sides need to hear a center in the center as do people in the "sweet spot". Phantom centers really don't work for screens over seven feet since some listeners will be sitting far off axis and will hear a center in front of them instead of the center of the screen. And some films like "Snakes on a plane" are 6.1 descreet mixes with a rear channel and info on it not found in the other channels. 6.1 mixes can be a single rear or a mono pair. Lexicon has had VERY good 7.1 algorhythms that make 5.1 or even 2 channel sound very convincing. Lexicon also has stereo sub provisions for the front 2 channels as well as an independent LFE out for a dedicated sub. The Lex will take speaker distances as well as fully adjustable crossovers for each channel into consideration when setting up your 7.1 configuration. In short the MC12b is very user friendly. I have my two channel speakers with their respective stereo subs connected to the MC12b. I can choose the crossover frequency and relative volumes right in the Lex processor. The LFE channel is active for 5.1 mixes. It will also allow for bass distribution to the LFE channel in systems where the main and surrounds are not full range.
Outboard scalers from Algolith or even simpler, DVD players with onboard upconverters to 720 and 1080i, are available. Machines like the Oppo are amazing given there under 200$ cost and video processing power.
Surround dvd's require a sound field using dipole sides where as multichannel sacd or dvd audio use point source surround channels. They are mixed differently than film. I use my system for film and use the lex for enhancing my cd's to 7.1.
Most cds sound great using lex's algorithms and some do not. Given your great two channel set up, your thread caught my eye. It seemed similiar in philosophy to my own.
Interconnects for the surrounds need not be the high end used for the fronts. Remember the surrounds in film are bandwidth limited. Multichannel audio like sacd and dvd audio are not. They can have full range in all the channels.