I run iTunes 7.5 so I am not up to date on the recent releases. 7.5 has a few settings in Preferences which control the sound but not any I can see that would affect stereo quality. There are also Equalizer settings available both for itunes in general under the View menu, and for each individual tune under Options when you Get Info for a tune. These don't directly set stereo separation but different equalizer settings may change some perception.
The other possibility is you are hearing something VLC is doing. I know VLC has quite an extensive set of video and audio adjustment features if you dig down in the right menus.
Incidentally, I have some tracks (e.g., some by The Beatles) where there is almost 100% separation of the two channels (e.g., vocals out one channel and none out the other), and iTunes plays those normally.