It seems 2 band SH also has ringing. When I implemented my SH2 irr-vol I used an Lanczos window to reduce them. Since only trivial SH co-effs multiplies involved in this windowing ops, from the performance perspectives I feel it doesn't like a big deal. Maybe the storage & filtering performance cost is not be the point about the question.
The FarCry's motivation really confused me for a while until by chance I found the Order 1886 (Sig’15 course) also used an multi-basis SG baking solution. One of most interesting things about the course is that they shared some experiences about using SH3 irradiance-cube to represent the HDR lighting, namely, HDR lighting can cause some SH lobes to be very large negative numbers to cancel out the high positive co-effs, which is really bad for baking quality and compression.
So finally I find my own answer: Don’t ever use SH irradiance-cube under HDR lighting situation. The irradiance-cube representation by using low-band SH under HDR situation may be far from accuate, and it's not suitable for baking output. Use muli-basis PRT method instead.
Indeed, that was the conclusion we eventually came to while working on The Order. SH has some really great properties, but ultimately it doesn't do well for storing arbitrary lighting environments. It's not so bad if you're storing very low-frequency data from indirect lighting, but if ever try to bake in direct lighting from an area light source the result is unusable without filtering. But then once you filter, you completely lose the directionality which also doesn't look right. SG's are much better in this regard, and also have the capability of storing higher-frequency signals.