Well, "banding" might not be the right word... It has to do with the change in cloud textures on the horizon - there are very prominent lines/edges where the texure ends and the sky begins during transition.
Well, that's odd. I haven't seen an issue with that at all yet. Actually, now after watching another foggy weather develop i also noticed that it does take longer than 5 seconds for the fog to completely appear. It's probably like 20-30 seconds. The nearer the fog comes the faster the changes become visible though, that's what i was experiencing the first time. But it looks great and i really don't know what kind of issues you have with it - in its current form it's almost perfect.
[Edit]
I just saw what you mean with banding. Odd that i didn't notice this before. I think it's being caused by transparent textures of far away objects (probably buildings and mountains), not the sky. How exactly did you create the fog? Would be nice to know, since i'm interested in things like that, and maybe it's possible to find a workaround.