First of all, what DPL IIx does is take a stereo matrixed soundtrack and make it 5.1/7.1, so what you're talking about here won't work.
I think what you're thinking of is the kludge in the early days of 6.1 (Dolby Digital EX/DTS:ES) days where people were taking DPL processors to decode the matrixed rear mono-surround soundtrack that is embedded into the two side channels.
Today, there are many receivers and processors that have systems that will expand a 5.1 source to 7.1 by using various sound steering techniques.
Then when you say "degrade", it depends on what you mean by "degrade".
When you apply any type of post-processing to sound, it changes it.
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