The problem with your workflow is, you're taking a minor abstract problem (the size your PDF thinks it is and announces itself as), and trying to fix it by making actual changes and compromises to the file contents and quality that could reduce print quality.
The image size in inches, mm, or whatever is basically "metadata". A 480 inch by 120 inch file at 300 pixels per inch (PPI) has exactly the same contents as a 240 inch by 60 inch file at 600 pixels per inch (half the size but double the quality), just with a different metadata label on the PDF "packaging".
I see what you're doing - working around an arbitrary limitation in Illustrator to create a PDF with a label that says "treat this as 480 inches by 120 inches". But your workflow is damaging the contents of your box:
- Any vector elements, such as text and vector artwork, are losing quality because they're being rasterised
- Your file size will be much higher than it needs to be
- Save-for-web it converts CMYK colours to RGB - and then your printer will need to convert them back again. This reduces colour accuracy and risks problems like misregistration since there will be no control over the ink mix for blacks and dark shades.
As go-junta and 13ruce say, it's perfectly normal for printers to expect artwork in a PDF package that describes itself as being smaller than the actual size. They'll scale it up.
The printer usually will have a preference and a specifications document for this banner size; if not, the important thing is that you maintain the proportions and the ratio of size and quality as you scale down. If you want the printed artwork to be 480 inches by 120 inches at 60 PPI, you could do 4:1 scale of 120 x 30 at 240 PPI, or a 10:1 scale of 48 inches by 12 inches at 600 PPI... Quality increasing in proportion to the decrease in size.
Definitely don't scale up in Photoshop. Photoshop is designed for photo editing and pixel graphics, it doesn't handle vectors so well, might misrepresent some of your PDF's settings, and tends to balloon PDFs to massive file sizes.
In theory, you could scale the PDF using InDesign and File > Place. Unfortunately, InDesign is even more size-phobic than Illustrator.
In theory, you could scale the PDF in Adobe Acrobat. Unfortunately, Acrobat is horrible. I've tried doing this before, it simply can't do it. The closest you can do is use "Print to PDF" to scale (but only to preset paper sizes) or using the page crop tool (but it's completely unreliable).
But for the print people, scaling it up is easy. The exact banner sizes will be configured on their systems. So long as everything is in proportion, for them it's (almost) as simple as ticking the "Scale to fit" box.