Well I finally figured out something, that I had not realized. Why the color is dropping in and out. It seems, it is relative to your distance from a system's star. When you jump in it all looks like crap when looking at nebula and to the galaxy core. As you travel away from the star the color increases in richness. Between 1000 and about 5000 ls the increase starts to build quite fast. How far away to peak color seems to be based on brightness (only tested 3 types). Very bright icy asteroids and moons don't seem to be an issues. It's still fugly when in close and the color banding is at peak. If this holds true ( I have been hurt before), at least at max with ASW off for a (little) boost in color and a gamma adjust, it's playable, at a distance anyway.
My previous speculation that ASW is confusing Windows has some holes, for sure.
The latest Dec2 Oculus update did fix the extra colour banding introduced with ASW (great!). It would be nice to see more detailed patch notes from Oculus.
After the update to v1.10.1.315586 (1.10.1.315393), I can't see any difference in the banding whether ASW is on or off. After several restarts, different games played etc.
That's good news - at least ED players can play with either mode and not suffer worse banding.
@dogbite - there has been a (presumably) shader controlling the galaxy map texture since launch - it is strongest close to the star, and blocks much of the detail, and it ends up posterising all but a few very dark shades. The Milky Way itself can be cut off with quite a sharp boundary too. And of course the star corona is banded. Its just simulating the glare close to the star.
As you move away from the star, the shader strength drops and more detail is allowed to shine through. The 2-3 shades of blue-black in the general space background slowly increases to 20-30 which makes it look a lot better. This effect has always been there, in 2D and in VR. You can see it interacting with the windscreen scratches/smearing too.
As far as I can see, its the recent introduction of ASW that brought out a new series of colour banding issue threads etc - but now ASW's effect has been fixed, we only have the original banding. Its still an issue, but it only shows up in the darkest scenes. I'm only really noticing the banding on moving away from a star after a jump, and in the left side of my Python cockpit in deep space. And in the menus where you can see some circular banding but its not distracting.
The video I took didn't really show the banding - it'll take a dedicated camera enthusiast with proper lenses to get the required photos or video. My iPhone is trying to constantly focus, or adjust aperture (digitally), and the changes in brightness seem to wash out the actual banding. Now the ASW-extra banding is gone, the normal banding is subtle - we can see it fine by eye, but its hard to capture with such poor equipment. I have a decent SLR (Pentax K20D, few years old now), but there's no way can I get it into/focus inside the Rift. Macro lens perhaps?
A capture of the monitor screen is effectively showing what I see in the Rift (not really enough for Oculus Support though). An illustration isn't enough evidence of a problem for Oculus Support?
Moon theatre in Oculus Video is still shocking though... looking up its still a pixelated, posterised mess. But, since you're hardly looking straight up when watching something (I just tested it again with Pulp Fiction, its not a major issue. The moon theatre banding changes depending on the brightness of the movie/video being watched. It's a neat idea, but I guess the shader is poorly executed (no, I can't do better).
All in all, I'm a bit on the fence where the banding is concerned - sometimes its not too bad and I don't notice, and other times its all I see and it becomes annoying. *shrug*
