It is designed for halftone results, so it must be seriously tamed in contrast for continuous tone results. The good news is that it is pretty easy to do. I would not recommend diluted Dektol or any other paper developer. The contrast is still too high and the midtones that are achieved can look reminiscent of halftone dots, as opposed to true middle densities. It can also be difficult to get repeatable results. You are better off with highly dilute one shot film developers, or specially made brews. Your best option IMO is Soemarko's LC-1, which is a home brew. You'll need metol, hydroquinone, sodium sulfite, and sodium bisulfite (A.K.A. sodium disulfite sometimes) to make it.
Thanks for the reply and for the tip about the paper developer being too contrasty. I'm sure I'll end up trying both a paper and film developer. Unfortunately I don't have the ability to make home brews.