All I can say is that if the .1 is a discrete channel then how can the decoder decide which channel to send that frequency to when you don't have a subwoofer?
Does it mean that if you don't have a subwoofer, you don't have bass? That's not the case. Does it send the bass to all the speakers? I hope not
I think they may use the .1 to duplicate bass so the AVR doesn't have to calculate how much bass to send to the sub from the other channels. If there's a sub, all it needs to do is feed it that channel and apply filters. I guess the channels have the full range baked into them and once you have a sub, it's just a matter of sound filters deciding what frequencies to play. No calculation or diversion of LFE necessary.
You're right about downmixing - the center channel gets split to the L and R. I wasn't aware that surround sounds like the rears are played from the front speakers. That sounds funky because a bullet from the back may sound awkward but then again if it's one bullet that only plays from the back speaker and kills an actor coming from the back, not hearing it or hearing just a bit of it would make you wonder how the person died so obviously the sound needs to play on the other channels.
The DD decoder does that so you don't need to worry about that.
That would support the claim of some people saying that 2 channels sound almost like surround. If your speakers have a great soundstage, the sound will envelope you and you wouldn't be missing anything, I guess.