I was playing with 'settings' a while tonight, and realized that I'm very unsure what 'Smooth Gradation' is supposed to do. Frankly, I can't tell much different with any of the settings, from off, to low, to high.
A random observation while watching the US Open: I liked my previous projector (RS20) very much, but one thing that annoyed me was its handling of fast motion. E.g., the ball on fast tennis serves was quite jerky. I find it significantly better on the Sony 1000 (with Motion Enhancer on Low); one can really follow the ball almost without even any (smooth) blur.
Of course there are other major advantages the 1000 has over the RS20 (brightness, sharpness/resolution, etc., etc.), and it surely should since the RS20 came out 3 yrs earlier (not to speak of the price diff!).
So if one sees no banding--which is pretty much the case with my 1000--one should just leave if 'off', I presume.