I did some extensive testing on this subject for my RiverWar scenario. If anyone noticed, I added a lot of dithering dots there with the effect to make all terrain a bit smoother. The only terrain that doesn't work as well as the others is the grassland terrain. With too many dots the grassland will cause strange horizontal lines to show up, which was mentioned earlier in this thread i believe.
Anyway, if you remove the entire dithering square, the whole map will be full with those horizontal lines. For some reason, though, this is only the case if you make it all purple (palette no 253 if I am correct). If the pink background colour is used, it does work as it should.
I don't remember the exact details anymore by heart, whether you should retain the diamond form or not, but this should work. Otherwise, have a look at my RiverWar scenario and try adding some dots and removing them.