First of all contemporary dSLR Raw files are a proprietary compressed file and often are little larger than Fine High Quality JPEG's, they only get large if converted to uncompressed 48-bit TIFF files.

The one thing you will apreciate in performance is upgradeing installed RAM to the maximum your system supports.

You did not name your video card, but for Photoshop performance a video card with a good Codec is needed to get good color reproduction, and most nVidia or ATI Radeon cards should be good, and you don't need the very expensive ones that are made to support 3D gaming graphics.

So when I open a RAW file to work with in Photoshop, does it open into a tiff format or a psd? I know I have to use psd if saving separate layers for working on later. When editing is complete, is it best to supply the lab (I don't plan on doing my own printing right now, will probably send files to Mpix) with a tiff or jpeg?

There are several choices as to how to arrange your workflow with Raw format dSLR files. My choice is to use a USB card reader and I just transfer all the Raw files from my Canon 5D memory card to my desktop as a folder, so the files remain in their native Canon Raw format. I then open this folder of Raw files in Bridge, Photoshops browser and it generates thumbnails of all of the raw images in the folder, and I can cull them and if I want to open one of them, I just double click on it and it is opened in Adobe Camera Raw. In Camera Raw I can adjust the image with the tools available, or I can just open it directly in Photoshop. Open in Photoshop it is not a saved file in any format, to convert it to either TIFF or .PSD I would have to use SaveAs and then select any of the supported image file formats I wanted to use to save the image into its file format.