I am creating a web advertising rate card. Basically a brochure. It will be a PDF file. Should I do brochure designs or collateral designs using Illustrator and then import the non vector images from Photoshop? Or can I use Photoshop entirely? Most importantly, does text quality come out better when creating a PDF through Illustrator or Photoshop?
The text quality will always be better in vector files; for this Illustrator is better.
It's better to use a publishing software such as Indesign or QuarkXpress since they're made for that kind of work, have better performance and also create texts in vectors. You also gain way more control on the output, the colors/pantones, and it's easier to use for multiple pages projects.
The next best option is Illustrator but it's basically a single page editor and should be use mainly to create vectors and graphics. It's not the perfect solution for layout but it will create very high quality texts and is easy to use.
And then the third choice is Photoshop. But Photoshop is an image editor and should be use to control everything related to the resolution and calibration of your images. One main issue with Photoshop is that, depending on how you save your files, it will rasterize (convert to pixels) your texts. So the text quality is greatly affected by this and doesn't print clearly unless you do this.
The way designers work is usually to import in a publishing software the Photoshop and Illustrator files. It's also possible to import images in Illustrator, and vector in Photoshop BUT the vectors will lose their quality depending how your import them in Photoshop! So it's really better to import images in Illustrator and do your layout with it, or use InDesign.
It's really a question of personal taste. The quality will depend on 2 things:
Photoshop is a raster (bitmap) editing program, meaning that it edits pixels. Illustrator is vector-based, meaning it edits points and lines. If you have a lot of photography, Photoshop is generally a better choice. If you have a lot of line art, Illustrator will serve you better. InDesign is also an excellent choice either way because of its fantastic type setting tools.
Tip: You can also use Smart Objects in Photoshop to keep your Illustrator vectors editable.
If you use raster artwork, it will likely have to be downsampled (lowered in quality) to send via email, and will still have a large file size. Vectors will be incorporated into a PDF with no downsampling (i.e. perfect quality that can be magnified infinitely) and will generally produce small file sizes (unless their quite complex).
I suggest solving the design issues, and this will suggest a particular technology. Both tools are worth knowing and using.
I'd go with Illustrator… wait… I already did :) and believe me it's convenient.
Seriously: while Ps let's you to easier mangle mercilessly pixels, Ill gives you nice tools to assemble multiple parts of design. If Ps would be like a canvas to paint on, Ill would be more like a montage table to perform your "colages" on.
Another important thing would be possibility to easily differentiate between "raster" and "vector" parts of your project. Also vector illustrations tend to be more flexible, reusible and smaller (in terms of file sizes) than their raster counterparts. "It scales better" argument is not exageration too.
You've mentioned "brochure" as your target. Well… in Ill exporting multipage pdf is brain-dead easy (CS4 and later) or easy (CS3 and before, at least to 10.0).
Between the two I'd go with Illustrator and like a previous answer crisper text.
Illustrator allows you to:
Save directly as PDF that is editable so you only need one file. With photoshop you'll have your work file .psd and PDF .pdf.
You can have multiple pages of various sizes with in the same document, so you can have a brochure layout sitting right next to a business card, which is great when you need consistency throughout your designs.
Custom shapes are easier to make. (Pathfinder palette).
Lining up items is better and easier.
Guide positioning is better and you can make custom guides.
Easier to draw straight lines.
You can break apart text to manipulate characters.
There are lots more that Illustrator can do that Photoshop can't for your purpose.
However if you want to manipulate raster images such as .jpeg then stick to Photoshop.
Import raster images (non vector) from Photoshop into Illustrator.
I'd use InDesign, frankly, but if you only have Illustrator and Photoshop as your options, I'd use Illustrator. It's a little easier to handle blocks of text, and I usually find the text comes out crisper.
What worked for me (and text quality wasn't compromised) was producing my art in Photoshop, mainly because I can get around here quicker than Illustrator then saving my files, up to you if you wish to save at print res (300dpi) and importing into InDesign.
Being part of the Adobe family InDesign shares many of the keyboard shortcuts and handles PSD files nicely. It took me a few hours to get up to speed,but once learned, it offers tools like the 'links' palette which manages your imported PSD files and if touched in Photoshop, maintains version by asking if you wish to update.