Dithering means to add a certain audio signal to 16 bit audio to make it sound more like it did as a 24 bit signal.
Be sure to select 16 for the Bit Depth and uncheck all Mix Enables.
When you can successfully run the Wave Profiler without an audio driver error, proceed to the next step. You will have to exit SONAR, re-launch, verify the settings you made in the Audio Options dialog, and click the Wave Profiler button again. In some instances, with certain audio hardware configurations you may be prompted with an audio driver error dialog during this process.