Hello Graeme
Dithering can typically add a bit or two of additional resolution when digitizing an analog signal -- see Chapter 3, page 38 of Steven W. Smith's book The Scientist and Engineer's Guide to Digital Signal Processing, available here: http://www.analog.com/en/content/scientist_engineers_guide/fca.html
I'm afraid I'm not familiar with its use in volume control. However, I don't see how it's possible to attenuate the 24-bit stream you described while maintaining full quality. Regardless of the processor's word length, the 24-bit serial link limits your resolution to 24 bits at full volume. Each 6 dB of attenuation inactivates a high-order bit -- at 24 dB attenuation you have a 20-bit signal remaining. This becomes very clear if we examine two I2S streams, the left one at full volume, the second attenuated. We see less activity in the attenuated stream:
If you could share the dithering reference you mentioned, that may help me understand the issues involved.
Best regards,
Bob