If you are going to do a lot of Photoshop, worry more about the CPU and RAM configuration than the video card.
If you intend to play 3D games, then you should get the 24" iMac with the GeForce 7600GT. The 20" iMac with the 256MB Radeon X1600 is a good performer, but the 7600GT beats it even while driving the bigger display - it's worth it if you can afford it.