What Jim said. But note that most of us use other apps in addition to PS, so IMO on an iMac it is probably best to keep apps and the OS on the single internal drive and set primary scratch up on a fast external drive.
In general IMO graphics users do not give enough attention to hard drives setup that really is very, very important for graphics performance optimization. A few comments:
More and more PS users are handling larger and larger batches of increasingly larger-sized image files due to the proliferation of still and video digicams. The fact that you have invested in LR implies that you are or may become one of those folks, and for those of us in that category our mass storage needs tend to increase very quickly.
The location, size/speed/fullness and connection method of hard drives can have a huge impact on performance within any given specific setup. Internal better than external; with external eSATA (not an option on Imacs) better than FW800 which is better than FW400, and USB2 unacceptable except for backup-only.
Hard drives slow as they fill. A good rule of thumb is not to fill any drive more than 70%, and for best speed keep important drives no more than 50% full.
Without careful management a single internal 250 GB iMac hard drive will become overfilled above the ~125 GB maximum necessary to maintain optimum performance.
Your iMac allows up to 1 TB (or maybe more) internal drive size. Since drives slow as they fill, an option is to replace the internal HD with a 1 TB drive and keep it less than half full to optimize operation (it is much easier to stay within 500 GB max on the internal drive than it is to try not to exceed 125 GB max). The existing iMac drive could be placed in a FW800 enclosure and used for scratch (separate 250 GB drive for scratch often is about right).
Hard drive setup discussions must include on/off site backup protocols. I suggest all drives be backed up daily on site and minimum weekly off site but with photos and other irreplaceable data backed up immediately on and off site. Note that good backup means that RAID0 solutions can be included in consideration; RAID0 is fastest as well as cheapest per GB.
Actual drive and array performance includes both throughput (RAID0 excels) and latency (RAID irrelevant, expensive fast drives required), and different workflows are more sensitive to throughput or to latency but real needs are seldom simple.
The fact that hard drives slow as they fill applies a very real speed cost to buying smaller drives such as 750 GB rather than 1 TB size. And currently the 1 TB size is often cheapest in cost per GB.
Do not partition. It just adds complexity and is largely a waste of time in a world where mass storage needs and maximum drive capacities both are constantly growing.
One good source of hard drives including preconfigured external RAID arrays is OWC: <
http://otherworldcomputing.com/>.
Pretty much everything impacts graphics app performance, so the more things you optimize the better. The maximum 4 GB RAM of iMacs, although quite workable, will always be limiting. Like Jim said max the RAM, and good policy is to restart or at least close as many irrelevant applications (especially browsers!) as necessary prior to an extended graphics work session.