Photoshop Freezing on limited access user account

Question

I am a computer teacher and when I log in as an Admin, no problems.  When the students log in and use Photoshop, the computers will lock up for a couple minutes at a time randomly.  No real pattern to it.  I have older machines, running XP, so it would be nice to abandon CS5, but I only have a license for Photoshop 6.  I have a 5-machine license for CS2 but they won't give me a lab license for it even though we spent big money to buy a site license for CS5.
Any ideas on how to allow my students to use Photoshop CS5?  I even tried updating to CS 5.5 and no luck.
I've tried the first set of suggestions on the Adobe web site including:
Updating Windows XP
Updating Photoshop
Re-creating preferences
Update video driver

Answer 1

Responding to some of your other questions asked, earlier:
The OS Temp folder is set via an environmental variable that you can view in a couple different ways.  Since I’m an old-timer I use DOS commands to do it: 
Start -> ( All Programs -> ) Accessories -> Command Prompt
C:\...> SET
From the long list of things displayed  you should see TMP and TEMP pointing to somewhere.  This is where at least some programs store their temporary data.  You might compare the SET listing for the Admin user and the Student users to see what is different.
Not having access to the C drive might cause PS to use another drive for its temporary files and if this is a USB-attached or network-attached drive things might slow down significantly.   You should monitor the PS scratch-disk-file location while PS is doing things to make sure PS is actually creating its scratch-file there, rather than some other, lower, location.  Do the students have to use a USB-flash-drive for storage?  If so, what happens to PS if you remove this to make sure PS is not using it, and/or does the access light flicker on this USB-attached device at points when the students aren’t reading or writing things to the drive, themselves, like PS or the OS is doing something with it?
You mention you cannot change the scratch disk.  Is this because there is only one internal drive and therefore only one item to choose from, or are there other locations shown but PS isn’t allowing you to choose them?
From your description of what is happening, I’d guess it is a memory problem, where at some point the OS needs to swap virtual memory and real memory and this can be very, very slow depending on how many little chunks the memory is allocated in.  XP especially seems to have a problem with this.  A way to monitor this is to go to Task Manager (right-click on your task bar and choose Task Manager) then go to the Processes tab and use View -> Select Columns… to add some memory-related columns so both Virtual and Physical memory are shown.  I don’t have access to an XP task-manager and Windows 7 does things differently so I cannot tell you exactly what the columns are called.   What you’ll likely see with Task Manager open is that at some point when the computer is very slow, the physical memory number will be counting down or up very slowly, in just a few K at a time, when there are many 100s of MB of memory allocated, and only when the PM and VM are stabilized will the system start to respond, again.  Also enable the Page Fault Delta column.  This will tell you how much the system is swapping between VM and PM every second.  The numbers might be sporadically very high in the 1000s or 10000s but if they remain very high for sustained periods, then your computers need more memory, keeping in mind that the maximum memory a 32-bit Windows system can use is about 3GB and each program will get much less than that.
It’s also possible that your students’ virtual memory settings are set completely different than the Admin settings.  You can check that in the Advanced tab of the Computer or My Computer -> right-click -> Properties -> Advanced, then Performance and  The Advanced on Windows 7, I forget how XP does it but somewhere similar.  The settings will be how big the minimum paging file is, how big the maximum is, what hard-drives the paging file is on, and whether the system can manage it or you are setting these things, explicitly. 
How much memory do these computers have?  How big is the system paging file (check in the Performance tab of Task Manager) and does this change between Admin and Student users?  Are the PS settings for memory any different between the Admin and Student users?
Another thing that can cause PS to slow down is a network-connected printer connection timing out.   Do the Admin and Student users have different access to network printers?  You might try removing/deleting all network-attached printers to see if things improve.