Looks like there were several things that might have contributed to the banding.
1. The scale of the "cloud" model was very different then the scale of the "profile" model. This caused the "cloud" to be very compressed to fit the action.
2. The density of the "cloud" model is probably much higher then needed for this usage of displacements, not to mention a greatly increased render time requirement.
The attached project has the mods I made. As the cloud model was scaled down to match the profile, the materials gradient position no longer matches what you had and will have to be re-adjusted.
Be careful with the material, adjust it at the model level as making adjustments at the material level does not override the drivers.
If I were doing this from scratch, I would make everything at a much larger scale, as it is to keep your Shroom action working, it was necessary to scale the material and it's percentage of displacement down dramatically.
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JRJMushroomRep_mod.zip