I've discovered that my 16 bit photos show banding at high pixel values when I'm on PS3 (newly installed) but not with PS2. I'm using a CRT. The photos are fine on my laptop on either version of PS.

I've tried all of the Color Management Policies: Preserve Embedded Profiles, Convert to working RGB and OFF. My working space is Adobe RGB. I created a 16 bit image with just a black and white gradient and the same banding appears.

Any ideas what I may be doing wrong?

Your video display settings may be 16 bit (5/6/5), or your monitor may be low-color and PS3 isn't set to dither for low-color displays.