hi,
How about 256 brightness levels. Is that practical?
As for now I do not used such resolution. In fact, I doubt that our eyes may recognize a difference between, for example, 132 and 133 step of LED bright (=
I think, Erik may say much more about it because due his posts, he has programmed a board which controls full-colour dot matrix.
In theory, 256 scale resolution requires about 20khz refresh rate. So, your ISR must take execution at each 50us. It is totally useless for "classic" C51s but still possible with high-end ones (Cygnal high-MIPS and even with Atmel high-speed chips, for example, AT89C51RD2 which works upto 60MHz). Anyway, you will need to create very quick ISR with assembler otherwise you lost all productivity of a MCU.

Regards,
Oleg