Yep, and many GPS receivers use a single bit quantiser to pick out a signal that can be 20dB BELOW the noise, it does NOT have to be 2 bits, greater then one is sufficient...
Consider that the input to the ADC is broadband, you are going to end up with a narrowband output from the decimator chain and every time you reduce the bandwidth by a factor of 4 you gain an extra bit of effective word length, by the time you have decimated down from a screaming fast ADC to a few tens of KHz, your word length has grown in quite a useful way.
Regards, Dan.