Hi Les,
Photoshop and Illustrator do take advantage of disks installed in your system for extra 'scratch' space. But you do have to enable it for each available disk.
In Photoshop you can specify which disks are used first before the Application uses other disks.
Once you've enabled the disks in Preferences->Performance, Photoshop will then automatically use the space on any active disks.
Disks are slow compared with RAM though, and these programs only use the disks, when they have exhausted their assignment of RAM.
A better upgrade for this situation is more RAM.
Having said that, most people will benefit from FASTER disks (solid state etc) than more RAM. RAM is not always the upgrade that will give the biggest bang for buck, but in this situation it will.
Cheers,
Charlie.