HDCD may or may not be manipulating 16th bit, but it sounds just fine on a non-HDCD decoding player. From what I heard it's using special noise shaping algorithm to extract close to 20 bits in certain audio spectrum. Probably similar to what Meridian 518 does as described here.
Meridian 518
It's quite amazing how the noise can be "shaped" out and away from the critical midrange in order to provide higher resolution.
Meridian 518
It's quite amazing how the noise can be "shaped" out and away from the critical midrange in order to provide higher resolution.