I have a theory...

In 8-bit mode, JJ2 will be using paletted graphics. This gives you only 256 different colours, but the red green and blue values of those colours can each be chosen from the full 0-255 range. So you can do a complete gradient with no banding or artifacts.

In 16-bit mode, JJ2 will be using RGB graphics. However since it's only got 16 bits to play with it'll likely be using RGB565 - this gives a range of 0-32 for red and blue and 0-64 for green. The result is you can't represent a smooth gradient if you have more than 32 steps. Instead the colours will jump in discrete steps which gives the artifacts you saw.

You need at least 24-bit colour (or 32-bit, which in practice is 24-bit with padding) to get the full 0-255 range for each channel, but JJ2 doesn't support that. So unfortuantly your options are to use 8-bit mode or try and design your tileset such that you don't notice the aritfacts.