Ya, it is "32-bit" right now. I thought maybe it was a colour profile conflict between Adobe Gamma and AMD Control Centre, but even after disabling Adobe Gamma, the colours are still posterized.
My monitor is an IPS panel too, so it can display the full 16.7 million colours (including 256 shades of grey), and I bought it because of that. But the colour palette is even worse than a TN panel right now. Even less than 16-bit depth too. I can't edit photos like this.
Edit: Come to think of it, I noticed the lack of smooth gradations in the fifth photo contest entry as well (which I mistook for excessive JPEG compression), and that was before Adobe Gamma. So the reason must be something else. The problem is very noticable when it is monochromatic,, e.g. blue skies look blotchy, etc.