I think the reason is, in everyday conversation, people say Green Day as one word, Greenday, with no pause inbetween. The Foo Fighters, on the otherhand is generally said with a slight pause inbetween.
Plus there's, you know, the fact that Green Day shows just how bad a band name it is. I mean, GREEN... DAY... Writing it as Greenday ignores the meaning of the words, so the name doesn't seem quite so terrible, so the 13 year olds who listen to them don't have to realise that Green Day are, infact, not all that good.