Ambient: If you are going to just do a quick project mix out of Sonar to burn to CD or whatever, pow-r 3 is what I use. Why? Because the help files gave the best description for that option. LOL! Supposedly some people can actually hear the difference each dithering option gives you. I never really tried it to see for myself, but when exporting out of Sonar for quick ideas or whatever, that's the one I use.
Now if I'm going to master something, what Tony told you is how I go about it also. The reason being, you should master your tunes in the bit and sample rate they were recorded in and dither/convert sample rate last. So you'd want to come out of Sonar like that as well with no dithering options enabled. Once you master the song, then you do that stuff.
Dithering basics: in a nutshell without getting deep into the science end of it, when you reduce a bit rate without dither, the numbers don't jive and it gives you errors. Most people will not hear these errors but some claim they can. The errors can come by way of sound degradation or even distortion....so they say. I've never heard it when I've chosen NOT to dither something for quick ideas. When you dither, it supposedly adds in a little random distortion but it de-correlates it and rounds out the errors and any distortion will be inaudible.
Another way to put it in simpler terms: You have a 24 bit file. You change the bit rate to 16 without dithering....numerically speaking, (if you choose to look deeper into the science) it will be wrong math wise. Dithering corrects the math when you reduce a bit rate.
Do we need to dither? I'll be brutally honest here. Personally, the jury is still out for me. I hear no difference with these supposed errors. Do I dither? Yeah, but only because everyone else does and I don't hear it degrading my audio...so I do it too even if I can't hear what it's actually doing. I have pretty good ears and get hired for jobs based on my exceptional hearing. However, I cannot tell the difference between a file 16 bit dithered and a 16 bit undithered wave file. If someone CAN, I would love for them to show us what and how to listen for it.
Hope this helps a bit but that's how I've always understood dithering.
-Danny