I think I finally managed to solve the issue for good.
Driver version 8.661 kept crashing for me so the rollback was not an option, and 8.681 exhibited the gradient banding which is extremely annoying, so I took a while to try some drivers and I finally found a version that doesn't seem to have either issues.
http://strags.com/
This webpage collects official ATI Mobility drivers from several manufacturers since ATI does not support mobility drivers by themselves, I found out that this driver package
http://strags.com/d/8.672.1.2000-WinXP-2003-Vista-2008-7-AMD64-x86.zip
Works wonders on an iMac i5 with ATI Radeon HD 4850.
The only problem is that these drivers lack of an installer, so they must be installed manually using Windows' "Update driver" feature, under Windows 7 the steps are
1. Right click on the Desktop, select display resolution
2. Click on the Advanced Settings lik near the display resolution dropdown menu
3. Click on Properties button
4. Select the driver tab
5. Click on the Update Driver button
6. Select the second option
7. Select the option to manually select the driver
8. Click on the Have Disk button
9. Select the folder with the drivers you just downloaded and select one of the files you see
10. Windows will automatically filter out the uncompatible drivers, leaving you with one option: ATI Mobility Radeon HD 4850 to select.
After this is done the screen will go black for a while and come back, hopefully with no gradient banding issues.
I hope this helps you guys out, it sure solved my problem for now