The "funhouse mirror" effect comes from motion during the sensor readout -- the top and bottom of the sensor are being read out at different times (the in-between parts at in-between times). You'll have problems if the scene isn't static or if the camera is moving. If the motion only covers a small vertical extent, it might not be a concern.
The banding comes from gas-discharge lighting, which flickers and can change color with the alternating-current power source. You'll have problems with fluorescent, sodium, mercury-vapor, neon, and other gas-discharge lights. Home "compact fluorescent" (CFL) bulbs generally work at a much higher frequency than the power line, so they probably won't give you grief -- if they're "dimmable" bulbs, they should be fine. But tube-style fluorescents will cause trouble.
