Cheap build for mostly photoshop

Those look like generally good selections, given the uses to which this machine will be put.
The PSU, however, lives on Tier-4 of the list at http://www.tomswiki.com/page/Tiere [...] gs?t=anon.
FSP makes a 450W peak unit that recently dropped in price on Newegg from $58 to $55. This is a Tier-3 unit that should be good.

Photo and video editing greatly benefit from more than one hard drive, you may think about going AMD due to it's lower priced CPU and motherboards and adding another hard drive.

I would use google check out and nab this Corsair for $69 shipped (newegg sucks for PSU's, never the best deal)
http://www.buy.com/prod/corsair-vx [...] 66485.html

If you can handle a rebate, I would go with some higher quality DDR2-800 RAM (Corsair XMS or Crucial Ballistix).

I would also drop the vid card down to a $50 8500GT since gaming is not an issue.

I went throught the build after all of your suggestions, and this is what I came up with:

Case: Rosewill R5717-P SL 120mm Fan ATX Mid Tower Computer Case withTool-Free kits
Power Supply: Thermaltake Purepower W0100RU ATX 12V 2.0 500W Power Supply
Motherboard: GIGABYTE GA-M57SLI-S4 AM2 NVIDIA nForce 570 SLI MCP ATX AMD Motherboard
Graphics: SAPPHIRE 100206L Radeon HD 2600PRO 256MB 128-bit GDDR2 PCI Express x16
Processor: AMD Athlon 64 X2 5200+ Brisbane 2.7GHz Socket AM2 65W Processor Model
RAM: CORSAIR XMS2 2GB (2 x 1GB) 240-Pin DDR2 SDRAM DDR2 800 (PC2 6400) Dual
HDD: Seagate Barracuda 7200.10 ST3250310AS 250GB 7200 RPM SATA 3.0Gb/s
Optical: LG Electronics Black LG Super Multi 18x SATA DVD Burner GSA-H62NK
Speakers: Logitech R-10 4 Watts 2.0 Speakers
Monitor: Acer AL2016WBbd Black 20" 5ms DVI Widescreen LCD Monitor

I am actually looking at a possible improvement in the monitor, just so that she has something that actually
displays the colors she might see in real life .

I would suggest to stay with the 250GB HHD and then get a secondary 500GB HHD for storage and to use for scratch drive. Most high-end media software uses scratch drives for temporary storage of data when working of a project. But they are regularly erase for future use of the space allocated when working on something.

Right now I'm running both Barracuda 7200.10 80GB for OS with a 500GB formatted to 100GB dedicated for scratch and the remaining for storage and My Documents folder. Hope that help.