I've been messing around with the Dolby Pro Logic IIx (5.1 to 7.1) and I'm highly impressed.
Defintely adds to the experience, and sometimes exceeds the results from studio 7.1 tracks.
I may be biased (and I realize this isn't "true" to the vision of the producer) but I love surround immersion, and this does a great job with the tracks I've tested.
5.1 vs 7.1 - Definitely go 7.1, without a doubt. My room is only 12'x17', which most would say is too "small" for a 7.1, but the rear speakers have added a TON of depth.
5.1 vs 5.1 with Dolby Pro Logic IIx (upmixed to 7.1) - Definitely 7.1 again. It does a great job of increasing immersion, and the way most tracks are mixed, the surrounds aren't really used for positioning, but rather ambient sounds etc., so exact studio duplication isn't as much of a factor (again, in my opinion).
To those curious, I hope this helps.