First, I think there is a misunderstanding about what a memory leak is. The term is somewhat of a misnomer as memory does not leak. What happens is an application or process does not give up or reuse the memory it has used when it is done using it. Instead, it just keeps grabbing more. Before long, you have one program that is consuming all your RAM resources and the system bogs down. Adding more RAM only prolongs the process.
If you currently only have 512Mb of RAM, then I agree 100% with Doug, you need to bump that up to 1Gb right away - that is the "sweetspot" for XP. Less RAM, and your system runs slow, more and you see some, but not a whole lot of improvement for the money. When starting with only 512Mb of RAM, adding more RAM provides the best bang for your upgrade money. Period.
Increasing your RAM to 1Gb from 512Mb will yield
significant overall computer performance gains! Not just with Photoshop, but with everything. With only 512Mb, Windows and your CPU are forced to spool data out to the Page File on the slooooowwww hard drive frequently. With 1Gb, Windows and the CPU will be able to use the much faster RAM. This not only results in much faster number crunching by the CPU, but saves wear and tear on your hard drive too.
If you are driving your monitor with on-board graphics, then that makes things even worse! On board graphics processors need RAM too and so the system will snag system RAM, anywhere from 32Mb to 128Mb (depending on the system) and dedicate that RAM for graphics processing. In effect, it reduces even further the amount of RAM Windows and your CPU have to work with, resulting in a significant impact on overall performance. Most on-board graphics processors are fairly low-end solutions - great for "Office" type tasks, checking email, surfing the Internet, etc. Adding even a budget $50 video card can yield significant gains as the card will have a better GPU (graphics processor unit) and it's own dedicated graphics RAM to work with, allowing you to free up
all the system RAM for Windows and the CPU. So not only do you get a better (faster) GPU with an add-in graphics card, you get dedicated memory, and you get a little system RAM boost by freeing up the previously snagged RAM. And with graphics intensives programs, like 3D animated games, and imaging programs, like Photoshop, the better the graphics hardware, the better the performance. So in terms of bang for the money, upgrading your graphics solution is the next best solution, after bumping up your RAM -
especially if using on-board graphics.
In the meantime, to free up some RAM for Photoshop, you need to look at what programs are running - generally, look at what programs start up when you boot. Sadly, because of badguys, you MUST have a complete arsenal of anti-malware security tools running at all times - these include an anti-virus, anti-spyware, and a firewall program. These all consume lots of RAM, and so does XP by itself. There's not much you can do about them, although some AV programs consume more (a lot more) RAM than others. So look at what else is running and see if you can stop them from running at boot, or simply remember to exit them before running Photoshop.
Also, malware (spyware, viruses, Trojans, keyloggers, etc) can hog resources and bog your system down too. You need to run a complete anti-malware scan to ensure your system is free of vermin. If you don't have a complete arsenal of tools, see my canned text on
Cleaning Out Malware for cleaning out your system, and for building your own security suite.
I'm pleased but it has taken nearly 1gb from my C: Drive is this normal 
.
