I read up on Dolby Pro Logic II at Dolby's own web site. Still, I don't know when to use it. Dolby's recommendation seems to be that it's good for everything that's not 5.1- or 6.1-encoded, including musical CDs. In other words, it's suitable for stereo and traditional Dolby Pro Logic materials. Is that right?

Yep, that's correct! Some CD's don't sound so good so you may want to default to stereo.

Sonicflood

I wish they would make an add-on external decoder for this.

I believe Dolby Pro Logic IIx was debuted at Cedia. It does 7.1 as opposed to 6.1 for DPL II.

I prefer Neo 6 to PLII. I use it mostly to watch the local networks.

Both are pretty good on cd music. If you are not sitting and just listening it is a bit better. But if you are doing focused listening I recommend not using it. I have never used it for normal 2 channel tv though.

I can really hear a difference between neo6 (DTS) and PLII (Dolby)

I prefer NEO-6 for films but DPL-11 for music because NEO-6 does not use the sub in Music mode.