I've been busy and haven't had time to listen to the examples, but in my experience there isn't really anything out there that's better than Dolby Prologic II. To me it strikes the ideal balance between channel separation and overall sound field stability. Other processes either have too much crosstalk between channels, or sacrifice stability and let sounds move around between speakers too much when they shouldn't, which sounds strange and can create distortion in some cases.

I've never been able to detect any difference between the results of hardware decoding as opposed to software. Jim Fosgate's original design was an entirely analog process, but Dolby has only ever released Prologic II in digital form, for after licensing the design they analyzed it via computer and came up with an exacting digital representation of the circuit behavior. Hardware decoder chips and software program versions are running the exact same algorithm, and will therefore come up with identical results.

As the name indicates, Movie mode is ideal for playback of most film soundtracks, especially those that are Dolby Surround encoded. The dialog is concentrated in the center channel, and the surround effects are sufficiently diverted to the rear speakers to provide a convincing representation of their intended placement. Music mode is ideal for any 2-channel soundtrack, music or film, that is in regular stereo does not have Dolby Surround encoding, since it focuses centrally-panned sounds less into the center speaker and uses the left and right to a greater extent, and uses the surrounds more for low level ambience than for panning purposes as in Movie mode.