John,
If you want the LED's to be dimmer in general, you should be able to achieve this by increaseing the resistance (decreasing the current) going into the LED (ie change 330 ohms to 1k or more). You could probably get away with using a single potentiometer and individual resistors per LED to achieve a "manual" variation of dimming by way of voltage division...I've never tried that though. If you want the amount of light to be variable based on software, you can turn them on and off quickly, but this will most likely result in flickering (as you may have noticed). The amount of dimming should be approximately a DC average of the on/off time period, sort of like pulse width modulation.
Hope this helps/works for you,
Andy