That’s correct! If you have the Dolby Headphone button turned on, you’ll be running two virtual surround systems at the same time, and that’d be pretty weird indeed.
Astro has a more detailed write-up about how to use Windows Sonic and Atmos with all their different headsets here:
Also, to be honest…5.1/7.1 driver headsets have never been amazing. Trying to cram that many tiny speakers into an area the size of an ear and still have it work is an engineering nightmare. The virtual setups are getting better and better, thanks to the magic that can already be done by simulating different setups through binaural processing.
If you’re looking to have more than two drivers, speakers will probably be your best choice for many years to come.