In practise you would use at least a 16-bit color image, which would prevent stair stepping, unless it is part of the original 35mm frame.
Pardon my ignorance, but what do you mean when you say “stair stepping”?
When you perform a color correction at a low color depth, the colors from one pixel to the next may resemble a step function, rather than a smooth transition.
Right, got you.
Can’t you have your time line set to a higher depth so that there is head space for the addition of the colour space?