I still think its simply decoding the HDCD data. The bitdepth is determined before any decoding/encoding takes places, so it would not change the bitdepth on account of HDCD decoding unless you tell it to.
If it were to do that, it would be a mistake in my opinion. Some people still have HDCD DACs and do not want the software decoding to happen. Forcing the decoding without an option to disable the decoding would mean that MC could not reliably be used for converting HDCD files from one format to another in a bit perfect form.
There was a discussion early on about using the convert function to create decoded 24 bit files. I think that is a good idea, as some people may want the decoded files to play outside of MC. However, it would need to be an option, for the reason stately above.
You can check to see if the new file is 24 bits simply by checking on the file size of the file after conversion.
If MC did a decode during a conversion, once converted, the new file would be a separate 24 bit file and the bitdepth of that should be reported as 24 bit. If, in fact, MC created a new file that was 24 bits but did not change the bitdepth tag to 24, then I believe that would be an error.