I'm not sure that there is a defined number of 'steps'. Factorio calculates pollution based on chunks, and that is definitely not something that can be changed by a mod, so you will always see squares with distinct boundaries where chunks meet.
You can, however, have somewhat more of a gradient, by changing the settings in this mod. If you change the mod settings "Percent of maximum value to use as upper bound" and "Percent of maximum to use as lower bound", you can make the gradient wider. E.G. by setting those to 100 and 0, you can have about the maximum gradient that Factorio allows.
Now. As far as changing the color, I will probably try to add a setting for that sometime in the near future. I think that's one of the only remaining things it would make sense to try to add to this mod.
