Anyway, the banding occurred because we worked in 24-bit color or 16.7 million colors, which isn't nearly enough to get smooth gradients in the blue range. To improve this we added a ton of grain, which was a cheat but it really did help 'smooth away' the banding. This was fine because our movies were still shot on actual film at the time and the grainy CGI footage cut together with the naturally grainy non-CGI footage nicely.
As a matter of fact, we had use a device to optically record our cgi footage to film so the footage could be physically spliced into the rest of the movie. Sigh...that seems like ancient history now.
At the time we had no choice but the render in 24-bit color but by 2005 or so, I was working at another studio and we switched to rendering to EXR format which significantly expanded the range of color we could work with, and banding was never problem for us again.
This is one big reason why I keep asking for EXR support in Moho. But even if Moho only got expanded color depth support for PNG, I'd be extremely happy.