It works based on where things are panned in the stereo, and just spreads that out across the 5.1 speakers. So, something panned hard right in stereo would be fully in the right surround speaker in 5.1.
You can control how that stereo mix gets placed with the width controls. How many degrees in a circle the whole mix will take, and what portion goes to C, Fronts, and the left over to Rears.
Yes, best results can be had by adjusting things on a per song basis.
Also if there are any artifacts, a "swishing" sound or "thin" sounding instruments, you can trade off separation for fewer artifacts by increasing either the adjspkr parameter or the rear blends parameter.
Some methodology for how to approach all this, though now data compared to current defaults, can be found in the guide in the "how to win with arctan" section.
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