[JKCalhoun]

You made the right call.

I think there should be a clipping of the lower-grayscale coming into your filter. A black-point cut-off.

I think that would get rid of most of the "swimming pixels" in the very dark areas (would become completely black areas).

Some loss of detail of course in the dark areas ... but what details was there anyway?

[fstark]

Interesting. I tried some light posterization (splitting into discrete levels), but it made the image uglier. Your approach would make nice blacks and whites. Grays would still suffer, but it is an interesting take.