Simulated surround sound is the phony stuff you get on 2-speaker laptops and TVs, where practically hear the same sound all around your head.
DPL2 legitimately generates distinct sounds from distinct directions radially away from the listener. This is evidenced by Rogue Leader's and Rebel Strike's circling Tie Fighter sound test, whose engine can be traced by the listener in a circling path without outputting fake/junk audio in the opposite hemisphere.
Now, DPL2 doesn't process 5.1 digital channels that are 100% independent of each other, which is what people are complaining about. DPL2 is a refined version of the classic technique that enabled color television and 2 audio channels to be transmitted on the same coax cable. "Simulation" does not apply here.
RE4, Prime2, Wind Waker, Battalion Wars, and many other games -- even supported PS2 games, use it to great effect, and i really do mean 5-point audio generation.