No, if you are in the main event for one of the more major festivals you'll need a 5.1 mix. Some of the major festivals have out of competition showings, in local bars, cafes, the foyer etc., and in that case stereo would be fine but actually screening in a cinema, you'll need a 5.1 mix. The only possible exception is documentaries which are occasionally in 3.0 (but usually 5.1).
You should be aware that the stereo effect/illusion doesn't work in a cinema. If you sit in the exact middle of the cinema stereo sounds how you would expect but either side of the centre line and it will sound like all the sound is only coming out of the speaker you're sitting nearest to. So if you're sitting to the right of the cinema it will sound like all the sound is only coming out of the right speaker. Audiences don't like that, we see a character centre screen but we hear their dialogue coming from 30ft away to the far right. So yes, unless you're sitting along the centre line, you'll hear a big difference between stereo and 5.1, regardless of sound effects.
Lastly, no, stereo is a consumer format, film is not (and has never been) stereo. The Oscars are awards for film and therefore stereo is not accepted. For this reason, the Oscar qualifying festivals generally won't accept even shorts in stereo, with the exception noted above.
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