Your step-over (Pixel Resolution in PicEngrave) for raster engraving images should be based on your focal point burn line. If this is set too small, overlapping of the burn lines will occur and detail will be lost and if it's set to high, un-burn lines will appear in your engraving. The smaller the focal point is, the finer image reproduction detail that can be achieved and gives a more intense burning power so you can engrave at a higher feedrate.
As Tweakie stated, you can set to a different axis letter other then Z and use another axis direction pin to TTL engrave using a Dithered image. PEP will generate Dithered images and allows A,B, & C axis letters also. There is another option in PEP that will allow you to use a Variable Feedrate (X,Y & F) to get shading using a TTL or CW Laser Diode drivers, but this requires a very good heat sink on your Laser Diode because it will run at full power for long periods of time. However, it does give excellent 8bit shading results.
Jeff
www.picengrave.com