MPEG-2 can support surround sound - 5.1 and 7.1 channel surround sound, IIRC - the question is: does your software support the conversion? If it doesn't explicitly have a conversion option for surround, then I expect you'll just get stereo.
AFAIK, MPEG-1 has no support for surround in the format spec, but I've heard of some trickery being used to squeeze multi-channel streams into VCD/SVCD.