Did you wear headphones? Maybe they have to be really good headphones or something but... I was wearing noise cancelling ones and I can hear a huge difference between this and stereo.

You have to wear headphones for it to work.

Because of the differences in the rates, it can simulate more than 1 dimension in position (left-right), it can simulate 2 dimensions (front-backward), and perhaps 3d?

Hey, isn't EAX supposed to do the trick?

- Piotr

My friend was also looking into this and thought maybe it could be achieved with granular synthesis? We haven't even heard of this before now but just an idea. It might be hard to control in realtime but you would need to control the speed of small sections of the sound (grains).

Also check this one: Matchbox
Really amazing.

Try this -
Open up a sound in some sound (stereo) in sound editing software and offset one channel by .000454 seconds (speed of sound is 1100fps, your ears are what, 1/2 a foot apart? So (6/12)/(1100) should get you the amount of seconds it takes sound to travel 6 inches), or just .0005, even .001 seemed to work. It actually sounds like it is coming from one side.