'98 subaru legacy-lights dimmed then brightened repeatedly, along with instrument panel, eventually power decreased...any thoughts? Alternator?

I assume there's a problem with alternator. Check the grounding to engine, check continuity of a positive wire between alternator and battery. the energizing voltage should be checked as well. Might be the bad connection between battery and vehicle body grounding. Diesel cars are sensitive even in a little loss of connection and rust in the connection points.

There's a pair of connectors, green, under dashboard on left. They should be left unplugged. When they are plugged together, they cause the lights and fans to cycle on and off for diagnostics.

It sounds to me like you may have a defective dimming switch. Are the instrument cluster lights working as they should? Do they dim/brighten with the dimmer? If the instrument cluster is working OK, then it could be an internal problem in the radio unit itself. Your panel lights are computer controlled. The processor in the instrument panel controls them. It uses a digital signal to "tell" the radio to either dim or brighten its lights. If the radio is failing to do so, the radio is the most likely cause since the lights work on "full power" which is also commanded through the same data lines. (this eliminates the signal from the cluster and the connection through the data lines.)

Your alternator may be going bad. Once the car is running, your battery has done its job and the alternator takes over. The alternator is responsible for firing the plugs, running your lights, your radio, your heater/AC, and anything else electrical, as well as keeping your battery charged. If the alternator is on its way out (or even has a less than good ground), you may experience some lights dimming, or even choppy radio signal. If the alternator is already gone, and your car is running off of the battery full time, you will also get the dimming you describe, and sooner or later the car will not even start. Take your car to an auto parts store (Advance, or Auto Zone, etc) and ask them to test your alternator. This is a free service.

try to jump start your car see if the interior lights are real dim headligjhts maybe you drained your battery too much or burned your alternator also check the fuse for your alternator see if blew hope this helps also check the fuse for your battery and check make sure the terminals are tight not dirty

http://legacygt.com/forums/showthread.php?t=26408&highlight=heater+control+lights
Thys is how to take it apart ,and you will need, Two P#72351AC061 light bulbs . And one P# 72351AC051. Easy fix .

HAVE THE ALTERNATOR CHECK

sound like a dead battery

Sounds like a charging problem. I would have alternator checked at local parts store. Also need to inspect the grounds. Both motor and body grounds. Most usually it is the charging system that is not working properly that makes the lights unstable then after it drains the battery it will not have enough power to operate the motor. Hope this helps and gets your Subbie up and going.

Battery is probably on it last legs... alternator sounds normal.