There's a third possible cause of the banding. It looks like you're trying to apply selective color to the image. While this is perfectly OK it appears to increase the banding in gradients, at least on 6bit/color displays. A better method for this image is to apply the Graduated Filter tool to the whole image by pulling it of the picture border and using -50 to -100 Saturation. Next paint the color back into specific areas using the Adjustment Brush with +100 Saturation and perhaps Auto Mask checked. If you spill color into other areas hold down the ALT key, adjust the brush size & feathering if necessary, and erase the spilled color areas.
Here's an example:
Cheers,
Todd