1. A noise reduction engine, comprising: a buffer for storing pixel values; a matrix selector for selecting dimensions of matrices for arranging the pixel values to represent regions of prediction error image residue; a diffusion engine for applying a reversible diffusion function for reducing the magnitude of at least some of the pixel values and for reducing variability in the difference between adjacent pixel values in a subject matrix by diffusing magnitudes of pixel values into each other to thereby reduce noise associated with application of a frequency domain transform and application of an inverse frequency domain transform, wherein an anchor value facilitates reverse diffusion by the reversible diffusion function; and an anchor value selector associated with the diffusion engine to select one of the pixel values in a given matrix as the anchor value, wherein the anchor value facilitates the reverse diffusion by the reversible diffusion function to restore the magnitude of the at least some of the pixel values after application of the frequency domain transform to the diffused pixel values and application of the inverse frequency domain transform to recover the diffused pixel values.