Seen this artwork online somewhere?

[Linthart]

If you were going to trace over it, you should do it with Illustrator not photoshop, using the pen tool... then it could theoretically be just as good as the original source file.

hmm why is illustrator better for this sort of thing? im having a little luck in cutting it out in photoshop, its just a royal pain in the bum

[kurdt_the_goat]

While in photoshop it sounds like you're removing the background that you don't want, in illustrator you'd draw the parts you do want. The result would be an infininitely scalable version of the artwork (vector). Here's a good tutorial.

[SMHFConvoy]

You're working with anchor points. Like dot to dot. Illustrator uses mathematical vector as opposed to Photoshop's raster process which takes in all the pixels in the image.

It's a smaller file but the advantage is as Kurd said is an infinitely scalable image.