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I am using a third internal drive for wip. I have a second internal drive for a scratch disk. I have allocated 75% ram usage in PS . I have 2 gig ram . There is no evidence of scratch disk usage. There is no increase in speed. I am working with 1 gig files. Can you help me with the settings needed?
Thanks

If you're working with 1GB files and 2GB of installed RAM, PS is definitely using a scratch disk. How big is your specified scratch disk and did you relaunch PS after selecting your scratch disk in Prefs? If you're looking for evidence of scratch disk usage, check the available space on your scratch disk during a PS session. After you quit PS of course the drive space is freed up again.
If you want objective numbers on the benefits of a scratch disk, go to the MacGurus forum and dowload PStest 2.2. Follow the instructions carefully and you'll have hard data to compare with and without scratch disk usage on your specific setup.