Best "pseudo" multi channel from 2 ch sources

As a HT novice I would very much like some guidance as to which AVR's/Processors are known for their ability to make a 2 ch source sound really good at a high end level? I find rear channel added ambiance to be enriching to the listening experience.In my case most of the source material will redbook cds. Also is a center channel speaker imperative for this scenario? Any guidance will be appreciated.
Short answer is none unless you've got several thousand dollars to spend.

If you are playing redbook cds mainly, the centre/rear channels will just be duplicates of the 2 main channels. I'd stick to a good 2 channel integrated unless you will be playing mostly multichannel sources.

You can always select an integrated amp that has 2 sets of speaker outputs, then run 4 speakers - 2 front and 2 rear, just make sure the speakers are reasonably easy to drive.
The only one I like is Trifield on the Meridian processors.
Meiwan wrote: If you are playing redbook cds mainly, the centre/rear channels will just be duplicates of the 2 main channels.

Not so. There are many systems that will extract ambiance information for surround and interpolate a center and these include the ubiquitous Dolby and dts processes. However, the OP is advised to try them before buying since they vary considerably in their capabilities and configurabilities.

IMO I have found no processor that surpasses the Angstrom 200.
I have the Anthem d2v processor, but for 2 channel sources I still use my Angstrom. It provides a fuller sound stage than just 2 channel alone. It also produces great 2 channel as well. There was one listed on AGON a day or so ago. PS, I have a $2000 DAC that does not out perform the Angstrom!! However, this unit a ten years old does not have the latest bells and whistles, but for DTS and 2 channel surround, it excels.
Either the Spread Spectrum Technologies Trinaural processor or the Miles Tech M86 (5 channel) or the M44 (3 channel) processor will do what you want using a 2-channel source. Both of these are analog domain processors; no need to go digital if you don't wan't to.

Full disclosure: I'm selling a Miles Tech here.
In HT, the center does more work than any other channel. The rears do the least. You can get away without a sub if your mains can handle the work.
I ahve an Emotiva UMC-1 preprocessor ($699 brand new with 5 year warranty) and it does a very good jo of synthesizing multi-channel from 2-channel sources. Just engage either Dolby PLIIx (Music or Movie) or DTS:NEO6 and have at it. Both of these can sound quite good with a proper source. I have found the effects to be quite pleasing and well worth a listen.

However, the UMC-1's DSP modes (Stadium, Hall, CLub, etc.) sound like real crap, zI never use them.

I had completely forgotten about the SST Trinaural Processor even though I reviewed it!

I have not heard any multi channel expansion I liked done in the digital domain. However, the McCormack MAP1 analog Multi channel preamp expands 2 channel to 5.1 in the analog domain (called Ambiance Retrieval Mode [ARM]), and I really liked it. I have since moved on for my main system, but I still have the MAP1 in my secondary system and enagage it on 80% of 2 channel sources to great effect. The same feature is implemented on the Conrad Johnson MET1 multi channel. The MAP1 sells used for less than $1,000 and in my view its a steal.

Keep in mind that in order to do the expansion in the digital domain in a processor you would either have to use a CD transport and the DACs of the processor for redbook, or digitize the analog outputs of your CD player. Both options are far from optimal.

In my estimation, you will get better results for redbook for less money by staying in the analog domain and use a MAP1. For multi channel you would get a BR player with stellar analog outs. The Pioneer BDP-09 is a very good candidate (no SACD). Of course, this setup will not give you room EQ.
If I was going to listen to 2 channel music in a multi channel config, I would buy a Anthem. I would get the avm 40 model. Anthem Logic is really good at what you are wanting.

The Anthem is good at 2 channel as well.
I also like the SST Trinaural Processor. I wrote a review here on Audiogon.

With rare exceptions derived rear channels don't work well. IMHO Three (L CTR, RT) with the SST Trinaural Processor is a big improvement over 2 CH, but four or five out of two is too much to ask.