iZotope's Dither sounds excellent.
Dither needs to be applied after any gain changes are made. Dither is calculated based on the amplitude level. Don't dither before limiting, if the limiter is raising the level of the track.
Each 'bit' represents 6dB of gain.
Dither adds in 'noise' to cover up the bits distorting, especially crucial for reverb tails. Bit depth reduction causes quantization errors without Dither.
Use 16-bit dither for creating 16-bit files. Use 24-bit dither for creating 24-bit files. 32-bit files do not need dithering.
Only apply dither once to a 16-bit audio file; otherwise, the noise added will get louder each time you use dither. Unless applied 100's of times, applying dither multiple times on 24-bit files isn't a problem as the noise is lower in level than on 16-bit files.