| When you load a really large file that is too large to hold completely in your RAM, the rest goes to your Virtual Memory or Paging File. This typically is on your C drive. You can adjust your virtual memory by reducing the amount on your C drive and adding the balance needed to one of your other drives.|
Recent versions of Photoshop (CS4, 5, & 6 I believe) allows you to designate a specific drive (not C drive) for a scratch disk which is really Photoshop's paging file for your images, but separate from Windows paging file. I do not know if Photoshop Elements version also has this option.
Moving files off C drive, uninstalling programs no longer used, cleaning out browser (History, Cookies, Temp, etc), doing a Disk Clean Up, and even reducing the amount of space System Restore uses from the default 15% to 10% or 12% of drive space, may all help. Expanding C drive or replacing the drive with a larger drive may be more permanent solutions to the problem though.
If you work with large images, have a 64bit operating system, and have the option, consider also adding more RAM to your system (how much depends on how much you already have, how much your system supports, and the file sizes you typically work with).
You have to be a little bit crazy to keep you from going insane.