New Mac Mini and Photoshop CS3

The Intel Mini can certainly handle a 1920 x 1200 monitor.

Photoshopping is going to be primarily computationally demanding, and demanding of the RAM and Virtual Memory system. Get as much RAM as you can. Although Apple doesn't provide it, you might consider the third-party option of putting in 3 or 4 Gigs of RAM (only 3 Gigs will be addressable.)

http://eshop.macsales.com/shop/apple/memory/iMacand_Mac_mini_memory_performancetesting

I can't see the graphics system really being an issue, since you are dealing with static images, not video streams.

The Mini uses a notebook hard drive, which may be slower than larger 3.5" drives.

A firewire-connected external drive would probably help with Photoshop performance.

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Yes, the mini will handle this perfectly well. The integrated graphics is really not a limiting factor at all in terms of Photoshop use. You would, as Boece says, be wise to add as much RAM as possible, and you need to be aware that Photoshop likes a lot of drive space and works best on faster drives than on the mini's 5400rpm device, but given the power of the C2D mini, you would not expect to run into performance problems unless, perhaps, you were working with large RAW files.

I am not sure what you mean by 3GB adressable?? If I put in 4GB of RAM, are you suggesting that I will only be able to utilize 3GB of RAM? If Apple only specs (or configures) to a max of 2 GB, then won't there be any side affects of addng more RAM?

Is upgrading to more RAM an easy install?

It does indeed mean that if you put 4Gb RAM in a Core 2 Duo mini it will only be able to see 3Gb of it. There is, however, no real downside or risk in fitting 3Gb RAM into the system even though Apple only specs it up to 2Gb. The only 'issue' is that to fit 3Gb, you would need unmatched RAM modules (1 1Gb and 1 2Gb stick) which means you loose the optimum performance of matches pairs of RAM. However, the loss of performance from that would generally be exceeded by the gain in performance from the additional 1Gb RAM available to MacOS.

Upgrading RAM yourself is not easy, but it is certainly not hard for someone with a little experience of working inside computers and who can do such work with care. You need a couple of thin putty knives (or pastry knives if you are more at home in the kitchen than garden) to get the case open, and some disassembly is required, but it isn't a difficult task. If you look down the page at http://eshop.macsales.com/shop/memory/mac_mini/intel you'll see links for a video of what's entailed.