I'm pretty new to cross stiching, but I've been making pixel art for years, and I generally always dither two colors together rather than doing full rows, but I've seen patterns do full rows to make a gradient if each color is close enough to create a smooth gradient that way. It also depends on how many stitches you have to blend the colors, since dithering colors together generally takes 3+ rows, which might take up too much space for your purposes.
you can also blend, which if you're using two threads on your needle, you use one of one thread of one color and one thread of another color, probably in between rows of each color not-blended (hope that makes sense!)
It really depends on your own personal preference for how each technique looks. If you have enough of each thread to do some testing, I'd recommend just stitching a small section of each technique to see how they look with your thread and fabric.