I found a quickish method!
You had almost all of the workflow, and the 'cutout' part that you had, is what I was missing when trying at first.
Starting with this image, because I couldn't find the one you're using:

The longest part for me was masking out the background. You may also need to add a Black & White adjustment layer after step 2 if you're using a colour image, but want monotone. Here's the workflow I used, though there may be a few 'unnecessary' steps:
Paste image into Photoshop.
Right click the layer in the Layers panel and choose Duplicate Image....
Go to Image → Adjustments → Posterize... and adjust the first layer to 4 levels and the second (duplicated) layer to 2 levels.


Go to Filter → Filter Gallery... and select the Cutout filter. Set the Number of Levels to 4
, the Edge Simplicity to 4
, and the Edge Fidelity to 2
. Use it once on each layer with the same settings.

Set the Opacity of the second (duplicated) layer to 62%
.
Add a Brightness/Contrast... adjustment layer and put the brightness all the way up, leave the contrast at 0
.
Mask the background if you want to, I prefer a clean background for this effect, so that's what I did.
Save for Web...
Drag and drop the new file on to an artboard, or use the open function, in Illustrator.
Use Image Trace / Live Trace → High Fidelity Photo.
Disclaimer: I cannot speak for the results in anything below Adobe CC, but I naively assume that you should get a very similar result in Adobe CS5 & CS6.
Save and grin like Ray Charles. :)


Also tried and tested on a famous image of Steve Jobs. It required 3 layers, and different opacity levels, and I found it better to run the image through PS and up the contrast after Live Tracing, the rest of the workflow was almost identical.
LiveTrace
, but you'll have to tweak the resulting shapes by hand.