simon Someone had mention that dither works for a mount that has no DEC motor after a precise Polar Aligment. That probably has to do with the fact that the DEC axis has not drifted yet outside the settling distance. Eventually it will probably drift enough and dither might fail too :-).
I am guessing that if you were to go into the Guide window and clear the guide graph (thus clearing the guide errors) once RA has also settled after a dither movement, autoguiding might resume again. But that is not a solution, just a diagnosis of the problem.
Anyhow, try first turning DEC Mode off to see if it cures your problem.
Chen