It is my understanding that Photoshop uses very little in the way of vRAM and/or advanced graphics processing. Adding vRAM to a system or upgrading the video card will likely do little for Photoshop's performance or display.
It is my belief that you should:
1) Get more RAM for your system. Photoshop will make use of that.
2) Get a better display and, if necessary, a better video card to support it.
3) Get more hard drive space.
For 2-D work, very little in the way of advanced graphics processing is done. Most of it is done by the operating system. Therefore, if your operating system will benefit by adding more vRAM and/or getting a better video card, you will benefit. Otherwise, you will not benefit.
If you use any 3-D programs like Maya, 3DS, Blender, etc. you will benefit by upgrading your video card and vRAM. But, or 2-D, there is nothing gained.
If you have just a "basic" display, you would benefit from getting a better one which has better color, contrast and dynamic range. These things are important to making good images in Photoshop. We now have the ability to work in 32-bit mode in CS4. (and other versions) It is now possible for Photoshop to display an image which is outside your display's ability to render. That's like owning a Ferrari which you can't drive faster than 50 miles per hour.
Getting a better display which can display a wider range and better colors will help you take advantage of Photoshop's abilities better. If getting a new display requires you to upgrade your video card, that is a given. But, by itself, upgrading is not necessary.
Photoshop uses lots of scratch space on your hard drive. Having a second hard drive to use for scratch space will help its performance. The system does not have to depend on one drive for reading and writing scratch data while it is trying to do its normal tasks. The ability to off-load that task to another drive is beneficial. More storage space is always a good idea. You're presumably generating lots of image files. You're going to need a place to keep them all. A big hard drive is a good thing to have.
System RAM is important. Trying to run a computer on just the minimum amount of RAM, these days, is kind of silly. Most modern operating systems use virtual memory to keep some data on the hard drive to conserve RAM use. This is a good thing to do but there is one drawback. Hard drives are a lot slower than RAM.
If you don't have enough RAM in your system, there will be lots of data swapped in and out of the "swapfiles" on your hard drive. The more this is done, the slower the computer will become. Adding more RAM prevents those memory swaps and prevents you from being slowed down.
Photoshop is also known to be a big memory hog! Yes, editing photos is a memory-intensive task. It is to be expected to a certain point. If you edit lots of large photos, you will need more memory to hold them. The more RAM you have the better you the program can do its job.
To my recollection, the only things upgrading your vieo card will bring you will be the ability to open more windows at the same time. A video card which has Open-GL and more vRAM is helpful in this situation. But the number of windows needed to go above Photoshop's ability to operate on them is high. I think is is more than 24. I forget the exact number. I have only had that problem one time. It only happened because I was farting around to see how many windows I could open at once. It would never really happen to me in a daily work situation.
RAM and hard drives are cheap. You can buy a 1 terabyte (1,000 gigabytes) hard drive for around $100.00 US. Cheap! RAM is selling for under $50 US per gigabyte. This is a whole lot cheaper and easier than fussing with your video card, in my opinion.
If you have the money for a better display, it might help you but, in terms of bang for buck, memory and hard drive are your best bets.