Not meaning to speak for Corinthian Baby, but I believe the "banding" he is referring to is not your stylistic shading choice, but rather the pixel art term "banding". This term basically describes areas of outlines or shading in which poor individual pixel placement destroys the intended illusion of a curve and instead appears blocky or jagged. There are some extensive discussions on what it is and how to avoid it which can be found with the search feature.
Personally - and as a consumer, because I have next to no artistic experience - I find your colour choice and style quite pleasant. I think that the shade of the tree's canopy needs to be slightly more vibrant to match the scene. The junction between the trunk and the tree is also garishly average in comparison with the rest of the mockup, the trunk and canopy need to "interact" more, if you get my meaning.
Functionally, however, I think you will need to tone down the brightness/contrast/saturation of the background elements a lot. The scene appears busy and slightly flat due to all of the colours in the foreground, midground and background all having the same level of the aforementioned. In a game situation, this would make the character and interactive elements somewhat hard to distinguish, and would probably become quite irritating to look at in short order.
I hope this is of some help to you.