Setting scratch disks
The Photoshop scratch disk is similar to virtual memory. For the best performance, you should set the scratch disk to a defragmented hard disk that has plenty of unused space and fast read/write speeds (rather than a network drive or removable media such as a Zip drive). Photoshop requires at least 1 GB of free hard-disk space, but more is recommended. If you have more than one hard disk volume, you should specify additional scratch disks. Photoshop CS2 supports up to 64 exabytes (EB) of scratch disk space on a total of four volumes. (An EB is equal to 1 billion gigabytes.) RAID 0 partitions provide the best possible performance as Photoshop scratch disks
Note: Adobe recommends that you set the primary scratch disk to a different hard disk than the one Windows uses for its virtual memory or paging file.
To set the scratch disk:
1. Choose Edit > Preferences > Performance.
2. Select the Active? box for each hard disk you want to contain a scratch disk.
Note: Unless you have a drive that has considerable space open, and is defragmented regularly, choose more than one drive, if one or more is available.
3. Click OK.
4. Restart Photoshop.
http://kb2.adobe.com/cps/401/kb401088.html