dear Ian,

my point was, optimizing instruction set on processor design is done by assigning opcodes so that over all length instruction set is minimum.his increases the code density. simplest encoding is using huffman encoding where frequently used instruction have smaller number of bits and less frequently use larger.

if you decide that your opcode will be of 8 bits and you optimize your codes and you have only three bits, after assigning opcodes to the instrucions, left for offset of the selected bank. if so no point in implementing fewer registers because they are not separate Register File but mapped into iram. the more locations in banks, reduces size of the code accessing the ram i.e.
'mov A,R0' is one byte in size while 'Mov A,0' is two.

abhishek