I use Lightroom 3 with 600 meg scans and don't have any real problems, only the occasional slowdown but that is on a new Mac stuffed with ram. Odds are if you are running XP your machine is older and might not be so smooth.
I personally think you only need Photoshop for retouching dust or scratches. I also do some global corrections in PS but generally find it faster to do most adjustments in Lightroom. I used to use Photoshop for retouching color in LAB mode but when I went to CS4 the dynamic sliders stopped working making my method pretty much useless. It wasn't fixed in CS5 either so I haven't bothered to update. I am pretty tired of Adobe in general I should say. Today I noticed that the color shifts between the develop module and the Library module. No excuse for that. Adobe applications are getting to be bloatware in my opinion. I don't know why Adobe locks down the color space in Lightroom either. I want to have a choice and I want to have control.