I am attempting to convert a PNG image into a shape file (so that I can scale the image to any size without any distortion). I tried selecting the image and creating a work path from the selection, but as you can see below the results are not very desireable.
Try selecting the background with Magic Wand tool. You may need to adjust Tolerance, Anti-Alias and Refine Edges to get what you need. Then go to Select > Inverse to grab just the image.