[asplundj]

I get some really ugly banding in dark areas with gradients. I wonder if it's possible to add dithering to help with this or if there's a different solution.

I'm running openelec 6 on a rpi 2

I get this both on videos I stream from NRK nett-tv and dvd's that I've ripped with winx dvd ripper premium.

[popcornmix]

I'm not sure dither is the right answer. Dithering would help if we were quantising from a higher bit depth to a lower bit depth.
We do actually do this in some cases, e.g. the Pi LCD is 18-bits and the conversion from 24->18 bits applies dither.

However HDMI output is the same bit depth as the encoded video, so dithering isn't suitable.
The banding is present in the encoded video, and really the video needs to be encoded with a higher bitrate to reduce blocking.