You'll be disappointed to know that it ships stock with 16-bit color (65,535) output. We are display limited, but allowing the display to have a wider color gamut can only help when looking at pictures or even playing games. There's quite a bit of color dithering at 16-bit and it's worsened with the poor Pentile screen Motorola chose.
open the file with rw root permissions,
change 16 to 32,
The screen will flicker briefly and it'll now display 32-bit (24-bit color + 8 bit alpha). Don't expect banding to go away with grayscale things like Android's widgets. This is primarily for color banding seen in pictures or other complex color things.