Let me address some of your post...
"I have a graphic that is about 5' x 6' and it uses a cominbation of photos and vector smart objects.
Alot of places are accpecting PSD files, and I thought since there are vector elements in the PSD file that it would scale well."
- This is a common misconception. The vendor is right. A PSD file that large may produce problems in the RIP. Try to avoid relying on .psd files with vector smart objects. They really do not scale like you'd expect them to.
"I got a proof back and the type are a bit fuzzy when you're about 4 feet away.
I told them about the fuzzy text and they said they would perfer it in illustrator, so I recreated the file in illustrator and placed all the photos in there.
I thought it would just be easier to do all my work in Photoshop.
Is this the problem I get when I use a PSD file to submit my artwork?"
- Yes. Large format digital printers are used in conjunction with Postscript level 3 RIP's or Postscript emulators. The best file format is a scaled EPS Illustrator file ( OK, you don't like EPS; then submit a native Ai file if you must...sorry, just talking to misinformed lugheads out there ) with "Placed" Photoshop files ( EPS, tiff, psd ). The advantage is you will get sharp text and, if your images are sized properly, great photo reproduction.
The banding has me a little worried. They say they can fix that. So, perhaps they proofed the job on an inferior output device? I suggest you get the vendor's specifications in writing. For instance, print .icm's; RIP; number of inks, etc. But, the long and short of it, you could even submit PDF's and have the RIP enlarge the file. I usually work at 25% actual size with 300ppi images ( final image res = 75ppi ) with a raster resolution set at "High". Any good workflow will have no problem sizing the Ai or EPS or PDF 400% in the RIP. I've done, I do it, and the banners print flawlessly.
Another thought on that banding. It's an artifact that is probably evident in the file, but is amplified when the file is enlarged. The vendor may have some sort of solution and I'd be interested to know what that is. They might add noise or some type of blur. You may not want them messing with the file and, if they do, there may be an additional charge for the job. If your PSD is, say around 150ppi, and you scale it 400%, then the final resolution will be 37ppi and if it originated as a .jpg, then you fill have banding. Write a post with the resolution and scale amount of your PSD file.
I used a solid color fill in Photoshop (K=77%). I've sinced used illustrator to make that block of color.
I've added noise to files before, but I thought that only applies to gradients.
The PSD file is at 100% scale and 300 DPI.
I don't do much printing, but I should ask more questions when selecting a vendor though.
(print .icm's, RIP, number of inks)