When issues like this come up, I turn to Merriam-Webster’s Language Research Service, which answers specific questions about words and their usage, for free. A response to my query emailed to lrs@Merriam-Webster.com arrived within a few days:
“We’ve been tracking the term ‘pixelated’ for some time now, and I expect it will be entered in our Collegiate Dictionary soon. Although the term is about 20 years old, it was largely used only in technical publications until relative recently. Furthermore, its meaning has changed somewhat over the years; in the earliest evidence I could find the word was used to refer to an analog photograph that had been digitized.
“ ‘Pixilated’ is indeed an entirely different word, but I’m afraid that because spellcheckers rely on dictionaries and because we lexicographers require evidence that a word is truly established in the lexicon before we consider it for entry, ‘pixilated’ is found in published, edited texts as a variant spelling of ‘pixelated.’ Given the word ‘pixel,’ however, I suspect that the ‘pixilated’ spelling will eventually fall out of use.
“In any case, you and your colleagues should certainly not hesitate to use ‘pixelated.’ Just as you use our dictionary as a source for spelling and word usage, we use your publication as a source for evidence of how the lexicon is changing and expanding. In many ways it’s the editors of publications such as yours who determine what goes into our books.”
I was chagrined to hear about the variant spelling “pixilated.” (Those darn spellcheckers; when typing this blog I had to overrule the “autocorrect” in Word to spell “pixelated” every time I typed it.) But learning that what goes into the magazine I edit has a bearing on what ultimately goes into the dictionary I rely on every day was downright pixilating.
"Pixilated" original painting by Alan M. Clark