Hello Don,
This option works when using mono sampes loaded in stereo only. You can experiment with the St. Anne's samples to verify that it works how you want it to since those are offered in mono.
What samples are you using?
True stereo samples even if loaded in mono will not work since the original sample itself needs to be mono, then using Hauptwerk's audio output settings to load them in stereo. Once this is done the panning should work properly.
See the text in the CODM guide which states:
This setting determines the virtual output positions of the pipes,
which are used when playing mono recordings in stereo or
mono/stereo recordings in surround/3D formats, synthesizing
the remaining channels as required.
Note also that the second portion of that is not yet available in Hauptwerk since Hauptwerk does not currently support surround/3D formatted samples (this is different than a sample set that comes with a surround version).
Thus, if you try it with mono samples it should work properly. You wouldn't be able to accomplish this with the MW 3-31 samples since they are in stereo and cannot be made into mono.