It's reduced, but it isn't necessarily eliminated.
If you compare a stereo "phantom center" acoustic signal with one generated by a real sound-source at center-stage, you'll find that they aren't the same. An impulse from a true center-stage sound source will reach each ear only once (neglecting reflections from the room surfaces, of course). An impulse from a pair of stereo speakers, energized with the same signal, will reach each ear *twice*, a few hundred microseconds apart.
Fortunately, our ear/brain system is reasonably good at "ignoring" the second copy of the signal... I gather that it's probably being interpreted by the brain as an "early reflection" from something close to a sound source located at the center-stage position. However, this filter-it-out ability may vary from one person to the next, and may depend on the type of program material... it's not always equally convincing, and can cause the phantom-center image to seem less "solid" and "convincing".
There are also differences between real-center and stereo-phantom-center behavior if you rotate your head, or move from side to side. A phantom-center image will appear to "wander" much more than a real sound source located in the center.
Quite a few ways have been tried to minimize the "blurring" effects in a stereo phantom center. Discrete multichannel is one, of course... stick an extra speaker in the center, and mike/mix signals only into this one channel.
Another method which works surprisingly well (and is fully compatible with normal 2-channel stereo recordings) is the venerable Dynaquad system, which uses three front speakers and one in the rear, wired up in interesting ways to a stereo amplifier.
A third way is to use DSP techniques: delay a copy of the left-channel signal by a few hundred microseconds, invert it, and mix it with the right channel (and vice versa), in an attempt to cancel out the second impulse image. I believe that Carver's "Sonic Holography" system may have used this technique but I'm not sure of the details. It can produce some strikingly effective 3D-like images, but can also introduce some acoustic side effects and may only work convincingly if you're sitting right in the "sweet spot" at equal distances from the speakers.