First time I have ever taken a non-converting image, and fixed it, such that a suitable conversion is possible.

Before I reduced the detail in "certain" areas, this is the best result. Note the terrible tell-tale "horizontal banding".


Seeing that the image was struggling with two specific areas, I went in and removed most of the detail. Below will detail the before and after images.

1. Reduce the image to indexed 8-bit colour, using an Atari palette file (in this case, I used the default palette from Atari 800 Win+). I chose to use no dithering at this stage
2. I went in highly zoomed, and reduced problem areas down to basically 4 colours. This freed up additional colours for detail and completely eliminated any horizontal banding.
   

Before:


After:


Here's the final conversion:

Stephen_LaSexorcisto.xex