Hello guys! So I was scouring the internet for a solution to my problem and didn't find a straight forward answer. Fortunately, I stumbled upon the solution my self and figured I would post it here for easy access for anybody in the future!
The problem was that when ever I would paint on my models in Mudbox, artifacts would soon show up and make my textures look blotchy, Here's an example:
Notice on A how the falloff seams to create those little circular lines even though this is just the default round brush. And on B you can see how when ever I paint with a little less pen pressure, the colours seam to separate into blotches.
This issue would get even worst once I would bake the textures onto an other model using the Mudbox Extract Texture Maps tool!
So the solution was actually pretty easy, all I had to do was create 16 bit layers rather then 8 bit. Unfortunately you cant transform an 8 bit layer into a 16 bit one and magically fix your texture, but you can start painting over them without creating more artifacts! Notice how much smoother the blending is. not more blotches!
**Edit**
On a side note, If you are unable to export as a Targa once your textures are in Photoshop, it's because your need to change the images mode to 8 bit channels. Go to
Image/mode/ 8bit/Chanel and voila!
Hope this helps!