How to set up wife's iPhone

See: http://support.apple.com/kb/HT1495

You can share an Apple ID for purchases, but create a separate Apple ID for iMessage. If you want to share calendars and contacts use the same iCloud account for both phones. For photos your best bet is to upload them to one of the cloud photo services like shutterfly or Google Picasa.

PhotoStream is not a long term solution. There is a limit to the number of images and how long they are kept.

It isn't a good idea to keep photos long term in your Camera Roll, either; it slows down the camera function, and, if the phone is lost or damaged you can lose them. One way is to connect the phone to your computer periodically and copy them to a photo app on your computer where you can organize them, then upload them to the Photo album app on your phone and their's.

Another alternative is to use a cloud-based server, and upload all of your photos to it. You can selectively allow access to your family and anyone else you want to see them. I use Google's Picasa, and the app MyPics, which both displays my Picasa albums and allows me to create new ones from the phone. They can be public, private, or selectively made available.

Shutterfly has a similar capability.

If you are always sharing with the same small group then Dropbox is a good solution. It is free for up to 50GB, and you can add additional for each new subscriber you recommend (like your family). You can access your Dropbox folders from your phones, iPad, computers, or any web browser. You install the free Dropbox app on each device.