What I've noticed is that PLIIx takes the stereo image from the surround channels and outputs that to the back channels. That's a simplified version, but essentially that's what it does. So if you have a sound that is anchored in the left surround, then it will still get output to the same channel. If that sound has any stereo blend with the right surround, then PLIIx is smart enough to image it properly into the appropriate back channel(s).
Panning sounds are where PLIIx shines. It does an excellent job and really makes the surround sound more believable than with a 5.1 setup since the back channels are stereo. You can hear the direction of the pan perfectly through all of the 4 surround channels. Also, diagonal pans that move from a front channel to the surround are far more effective with PLIIx enabled. Where it gets interesting is when you take a 6.1 soundtrack and apply PLIIx with it. Since there is even more information to work with, PLIIx does an even better job with the surrounds.
Another benefit to PLIIx that hasn't been talked about in this thread is how much more spacious the soundfield is with PLIIx enabled. Surround effects like rainfall, jungle sounds, wind, ocean waves, etc. sound much more realistic since you are truly "surrounded" with 4 surround channels. I use PLIIx on every source all the time: DTS / DD 5.1, DTS-ES / DD-EX 6.1, and PCM 5.1. I'll NEVER go back to a 5.1 system again.
An artsy example of how it makes a regular movie more believable would be when I watched Turistas last night. It had jungle sounds, rainfall, and underwater scenes and PLIIx took the 5.1 surround and spread it among the back channels and really enveloped me in the effect.