QUOTE(mcbear @ Jul 1 2008, 10:38)

And being Layer 2 it is not compatible with Layer 3, although a full MPEG1 Layer 3 decoder should be able to decode the L2 base stream....so much for history.
The statement ist true, but the reason is not. As you say, the layers differ entirely, preventing them to interoperate in any way. There is no such such thing as a "base layer", and layer III is *no* extension bitstream to layer II.
Actually, the reason is because the standard requires it:
ISO/IEC 11172-3:
"An ISO MPEG Audio Layer N decoder is able to decode bitstream data which has been encoded in Layer N and all layers below N."
The word "layer" doesn't have the usual meaning here, maybe the three different codec algorithms (which have been developed more or less independently at different labs) have been named like that because they share common functional building blocks, and each layer adds some more; however, this does not mean the bitstream is layered.
Layered bitstreams exist in form of the extension layer of MPEG-2 Multichannel, DTS 96/24, MPEG Surround extensions, hybrid lossless coders such as SLS, and in MPEG-4 BSAC (optimized for bitrate scalability).
W.