I saw your video. It looks like you are doing some great things with your machine. It is very inspirational. I hope to have mine engraving this weekend. I would love to hear more about your machine and it's capabilities.
Here is my understanding of the plugin....Anybody...Please correct me if I am wrong.
The plugin sets a single bit for each step based on the image pixels. There is no grayscale information. Since there are usually more steps than pixels, it attempts to dither (
http://en.wikipedia.org/wiki/Dither) the grayscale pixel across several steps, but it is still just on/off information per step so the power level does not come into play. I don't know if mach can store more than one bit per step, but it does not look like it.
I am not sure how fast the power supply can react to power level changes using PWM. The Mach3 PWM is rather slow for engraving. If you could change the actual laser power level in 20ms (which I doubt). It would take 20 seconds to go 1000 steps. That is probably not practical.