Best is to upgrade all to the max. every single hardware plays a part.. from CPU to motherboard to ram, hdd, graphics. If you can get a major upgrading.. upgrade on this sequence first..
1) RAM to 2GB or 3GB, depends on your MB have how many slots. (photoshop does require lotsa ram)
2) Get 2 same capacity HDD and install to Raid0, this should improve overall read/write speed.. naturally try to get SATAII if your mb support.. dun go on the slower IDE.. SATA I still ok if you don't have SATAII
3) CPU, dual core does have a significant improvement over single core.. quad-core also outperform dual core.. for Intel, after core2duo.. there's still core2quad and core2extreme.. :bsmilie:
4) graphic card do not make so much a difference as long as you have a pretty decent one.. my 7300GT works very well for me.. don't see any significant differences vs 7900GT or 8600GS which I installed for my customers