I. Introduction
If continuous channel inputs are allowed, the capacity of discrete-time intersymbol interference (ISI) channels with additive white Gaussian noise (AWGN) can be computed using the water-filling theorem [1], [2]. In many applications, the physics of the channel do not allow continuous input alphabets. A prime example of a two-level (binary) ISI channel is the saturation magnetic recording channel, because the magnetization domains can have only two stable phases [3]. Other examples include digital communication channels where the input alphabet is confined to a finite set [4].