From what I read in one of the Adobe PS developer blog they suggest a 64bit OS with 4GB of ram. PS is still 32bit and still can't address more than 2GB but the extra 2GB is used to cache the scratch disk (starting from CS2).
A RAID0 (stripe) for the scratch disk is the way to go (they clearly suggest it), but it's a NONO for data storage, project storage and so on. Unless you do daily backups.
I suggest you a cheap RAID0 of small drives for scratch disk and non-sensible informations.
keep your existing drive as storage
buy two decent (still pretty fast) 80/120GB (if you don't keep any other data on it you save on fragmentation, otherwise use the first partition for scratch, the second for data)
buy eventually a controller (with 64bit drivers) if it's not onboard in your machine
install xp 64 or vista 64.
This is AFAIK the best (but still cheap) conf for PS. I've just built something similar and it's pretty fast, especially considering I'm working with huge projects in the range of 500MB PSD.