Arstechnica, one of the sites that made my "techy" news macro, has posted a nice review of Vista audio enhancements.  Bass tweaking sounds great, and one feature is quite interesting from a psychological perspective:

Speaker fill

Speaker fill is a technique that is used when there are more speakers available than channels in the source music. In other words, if you have a music file that was recorded in stereo with only two channels, Speaker fill will synthesize additional channels and direct them to the appropriate speakers. It works by manipulating the channel sound in subtle ways—such as adding small delays or applying a filter—and then channeling the appropriate frequency levels to the appropriate speakers. From http://arstechnica.com/news.ars/post/20060907-7682.html, 9/7/2006 7:57:50 AM, by Jeremy Reimer

I'm not sure how well this works, but the principle sounds right. Your senses, and in fact cognition, have time limited buffers for information and have to be good at filling in the gaps. Vision has a remarkably tight high-rez view of 2 degrees with a fairly rapid refresh rate, potentially moving a tiny amount almost as fast as your tv's refresh rate but creating greater than 1/10 second "blindspots" while you make larger eye movements. So while the delay doesn't quite emulate true positioning, the mind can accomodate and integrate the sound with a likely interpretation of position.

It's been a month of heads down time getting ready for our refresh over at live.com (search). I expect to be posting with accelerating frequency as we start to really showcase our new stuff (and I get some time to look outward).