My current best 2-channel system, when set up right, playing CD quality or better lossless audio that is well mastered or live recordings, and being near the stereo sweet spot, gives me a concrete (and sometimes almost startling) sense of "the person is right there". So far all who I have demoed it for came away agreeing that it achieves that result as well.
I have found that it is distinctly easy to "blur" that level of spatial cues accuracy. Switching any of the elements of the sound chain (DAC/pre/amp/speakers) to ones that are not VERY low harmonic and particularly IM distortion loses it. Audiophile "sweet amplifiers" like tube or various class A transistor amps ruin it quite handily, though the pleasantness of the tonal result is undeniable and I can still enjoy it a lot.
I am actually fascinated with this point and based on my experiences strongly suspect that our "spatial cues bioware" is more sensitive to some kinds of distortion vs. the parts of our hearing system that perceives tonality and interprets sound content.
Having said the above, I have not tried performing careful tests on exactly what level of exactly what kind of distortion creates the blur, and after some experiments with a couple of different combinations of each element of the hardware chain generating that great result (DACs, amps, and some custom speakers I've built) and measuring them all, though all excellent by say ASR recommendation standards, it would still be a bunch more work to establish concretely what's going on... I slowly scratch away at it in my proverbial copious spare time, but the rest of life has kept me from going there fully.
So, in summary, my current best speakers - the 3rd gen, and I'm working on a 4th gen - are arguably well beyond human hearing limits of distortion already. Even my 1st gen custom speaker was reasonably well hitting that "the person is right there" point, and though it seemed to get better from at least the 1st gen to 2nd gen in a perceptible way, I have not done blind listening tests to actually prove there was a non-placebo difference, haha. But I'm having fun at it, and my 4th gen has other characteristics that I want out of it while (probably pointlessly) also minutely pushing the distortion down a bit further.
FWIW, my 2nd and 3rd gen speakers use Purifi mid/woofers and RAAL ribbons. The 4th gen speaker will use an array of Purifi M midrange drivers and the same custom RAAL dipole ribbon that's in the Aries Cerat speakers pictured in the first post in this thread, arguably some of the best out of each of these driver manufacturers.