1. A method for multi-level error diffusion halftoning an input digital image having input pixels with corresponding input pixel values and N i input levels to form an output digital image with reduced error diffusion texture contouring artifacts, such an output digital image having output pixels with corresponding output pixel values and N o output levels, where 2≦N o <N i , comprising: a) determining a fraction of input pixels to be modified using a periodic dither signal in response to the input pixel value of the input pixel, wherein the fraction of input pixels is a function of the texture artifact characteristics that would result from the application of a multi-level error diffusion halftoning process to a uniform image region having the particular input pixel value, the fraction of input pixels being larger for input pixel values that would produce visually objectionable texture artifact characteristics than for input pixel values that would produce visually pleasing texture characteristics; b) modifying the input pixel values for the determined fraction of input pixels using a periodic dither signal determined by modularly addressing a dither signal array with the row and column address of the input pixel in the input digital image, wherein the dither signal array is designed to produce periodic dither signals having low visibility to a human observer; c) applying the multi-level error diffusion halftoning process to the adjusted pixel value to determine the output pixel value; and d) repeating steps a)-d) for multiple input pixels of the input digital image to thereby provide the output digital image.