I spent most of the day trying to get the anti-cheating shader to work. I still don't have it working quite right, but it's getting closer. The idea is to create worse and worse banding the darker something is, thus blurring any details. I am able to create banding just fine, but making it vary depending on the brightness is proving to be a bit troublesome.
If you are looking for an IDE to write shaders in, I recommend RenderMonkey by AMD. It supports both Direct3D and OpenGL shader languages, and shows you a preview of the shader you are writing. Intellisense and syntax highlighting are also available.