Personally, I don't use the scanner for dust and scratch reduction. Think about it. What this does it to let you choose a dimension beyond which you do not care about the detail. You still have this option in Photoshop, so why let the scanner destroy your image quality for you?
I prefer to eliminate the worst offenders (like 3-5 pixels) "by hand" - one-by-one - with the spot healing brush set to 7-8-9 pixels, if possible, or the clone tool if it is not possible to use the spot healing brush. YES, it is tedious, but it lets you keep the high resolution your scanner is capable of giving you.
If you are doing a 20x30 print, you will be glad you did it this way. If you are only doing a 5x7 print, you can get rid of the worst (big) offenders, resize, and use Photoshop "Dust and Scratches" and play with it to find a balance between getting rid of the junk and keeping the good stuff.
See these and see if I put any gems of wisdom in the comments.
http://www.flickr.com/photos/samfeinstein/sets/72157601316601148/
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Ben, I guess I don't mean a loss of resolution, but rather a loss of detail. I know that the dust reduction looks for sharp contrast at the small pixel level and blends things in. The problem is, you lose eyelashes, for instance, and other things with fine, fine detail that are only 1,2,3 pixels themselves.
I do this in Photoshop (Elements) as you can always undo it if it goes to far. If you do it in the scan itself, you can't bring back the detail without doing a new scan.
I don't use nearly that much sharpening, by the way. I usually use 50% at 1 pixel radius, 1 threshold level. Sometimes I go as far as 100% at 1.5 pixels, but that's usually it, unless I am trying to save (someone else's) image. (haha)
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Ben, I'm going to try that dust bit with the scanner next time. I didn't realize how it worked. Thanks.