The latter. We based the Involve decode on the mathematics of the old Sansui QS system, because it's perfectly circular and makes for a much better surround sound extraction. However it had a tendency to create a compressed stereo image. SQ on the other hand sounds great in stereo, but the resulting decode only leaves about 3dB of distinction to decide what is front and rear, and so the surround decode was inferior. However, in the 70s, more people had stereo setups than quadraphonic, so as a result a lot more material was released in the SQ format.
When we released the original Surround Master, it was Involve/QS only, and we turned to this forum to test our gear. The result was, to paraphrase "Yes it's great, but can you do an equivalent modernisation of SQ decoding as well?" and so we spent some months on that, the V2 and V3 Surround Master now does both QS and SQ decoding. The SQ mode is also good for pro-logic II recordings, as they based that format partially on SQ maths, and the Involve/QS mode does a great job of decoding stereo into surround, as well as great decoding of other phase-related matrix systems such as RM, Ambisonics, Qsound, Dummy Head, etc.
The only thing we don't really do in the SM is CD-4, which is a modulation/demodulation system rather than a matrix format. It has been requested many times, and we'd like to eventually, we're just a small team with other priorities first. Still, never say never.
Oh, to answer your question further, SQ does decode stereo to a degree into surround, but nowhere near as pleasingly. Not to our ears at least, YMMV, but the Involve/QS surround extraction is superior, from an engineering perspective, also.
~D
Oh, we also supercharged the QS encode and made it smarter about encoding decisions, so the Involve encode has the surround capability of QS but with a much better stereo presentation. It's a free license to encode - Suzanne Ciani's "Quadraphonic Live!" album was produced with the use of our encode format.
