> In my experience error diffusion often gets muddy due to dot gain

Absolutely - there's a reason why traditional litho printing uses a clustered dot screen (dots at a constant pitch with varying size).

I've spent some time tinkering with FPGAs and been interested by the parallels between two-dimensional halftoning of graphics and the various approaches to doing audio output with a 1-bit IO pin: pulse width modulation (largely analogous to the traditional printer's dot screen) seems to cope better with imperfections in filters and asymmetries in output drivers than pulse density modulation (analogous to error diffusion dithers).