adobe photoshop - How to convert a raster image into vector?

I'm trying to convert a icon from .psd format to vector. Here is my .psd file snapshot.

This is my converted(Vector) file snapshot after live trace.

I mean it has lot of blurs. I need pixel perfect result. How can i achieve that. Illustrator live trace allows only upto 256 colors?. What should i do if my source file has more than 256 colors?

Thanks

Answer

Live Trace doesn't do gradients, so can only work with discrete colors (hence the banding). The engineering involved in working with arbitrary numbers of colors would be horrendously complex, involving from-the-ground-up rewriting of Illustrator (there are limits on the number of individual vectors in one document).

To convert this image you would bring it into illustrator, trace the paths with the Pen tool, then use Gradient Mesh in conjunction with the eyedropper tool to recreate the gradients on your vector layers. There are myriad tutorials out there on the web. This one from vectortuts covers exactly what you need to do. Google "gradient mesh illustrator tutorial" for the >1,000 others.