I've listened to a lot of stereo music that when listened to through good headphones sounds quadrophonic. For instance Pink Floyd's The wall seems so 3D even in stereo.
How to place my instruments and work with them in 3D using VST plugins?
The 3D placement is just playing with EQ, volume and reverb. This wont give you a perfect 3D effect but it will work. In general remember those rules.
EQ: The farther the sound the less high frequencies it will have (so maybe use a low pass filter)
REVERB: the farther the sound the more wet signal you'll ear, less early reflections and less pre-delay (when the signal is closer you have more ms of pre-delay)
VOLUME: now that's an easy one, when the sound is far away you have of course less volume.
Hope this helps a little bit.
In short, filter your signal through modifications of the frequency spectra to match notch shapes of HRTFs, introduce interaural time-delay for left-right distinction, and use geometry model (e.g. room) to add in early-reflections/reverb to simulate depth. We did all this in a recently released 3D panner/mixer/reverb plugin. Muze: 3D Binaural Reverb/Mixer/Panner VST/AU