Is anybody else getting a weird banding around their figure if they use a z-depth pass and photoshop lens blur? It's about 2 pixels wide all around the figure, if the background is somewhat blurred it becomes very obvious.
Or has this always been there and I am just realizing it now?

The zdepth mask has very jagged edges in my experience. I use semidieu's ARS2 for masks which I've found gives a smoother result, but I still find issues. Sometimes making an alpha for the affected area can help with cleanup in photoshop.

DoF at render is superior for this reason IMHO, but I've found that 16-20 samples is best for smooth results and even with the speed boost in PP2012 it can be very slow.

It can happen. the z-map is not very detailed and has quite a small number of finite bands rather than a greyscale.

I often find blurring the mask can help.

I have not used it much in Poser, simply because it doesn't give the best results. If I am going to use it, I render it at a much higher resolution so the banding is lost when resizing it.

I quite often use a bit of gaussian blur on the Z-Depth out of Vue, only very slight but it does seem to smooth things out sometimes

Banding in z-depth mask in photoshop can be very noticeable indeed, even at high resolutions and quality render settings. I don't know if it's a photoshop issue or a Poser issue. Editing the mask, as others have suggested, with blur or by smudging by hand, is often necessary. But it is, indeed, much much faster than doing it within Poser itself.