I keep my workings, but not on my main computer, I archive them off to another machine.
In more detail. I try to avoid using Photoshop and Paintshop because they are such great slow, clumsy programs, especially Photoshop. Mostly, I post process using only PMView and Neat Image, using Painshop or PSE2 (Woops - I meant to write "Paintshop", not "Painshop", but on reflection maybe I ought to let it stand) only when I have to. I can crop, rotate, adjust saturation, sharpen, reduce noise, and resize much faster with PMView (and Neat Image for noise and a litle sharpening), and also see exactly what I'm doing with a full screen devoted to the picture I'm working on, none of it taken up by surplus tools. Only when I need to clone out dust or tweak the lighting or otherwise get fancy do I fire up one of the heavier-duty image editors.
But in either case, I keep my workings in TIFF format. Every few months, the scratch folder gets too big for my very limited storage space on the laptop and I archive it off to a desktop system. The laptop has twin drives, 80 and 120GB, but the desktop (like all decent desktop systems) has effectively unlimited storage. Presently it has a 250, two 300s and two 400GB drives internally, plus a couple of external 300s. I just upgraded it a couple of weeks ago, so that's plenty for the time being. Being a desktop system, it will be cheap and easy to add more storage to it when the time comes.
The long and the short of it, Chris, is that unless you are limited to a laptop system, simply add more storage as and when required. Full-size 3.5 inch desktop hard drives are really cheap these days, and getting cheaper every month, so simply add a second or third hard drive (around 300GB is the best price per MB right now) any time you run short of space. Compared to what you pay for a camera, a lens, or even a decent tripod, it's chicken feed.
While you are at it, buy an external enclosure (Firewire or USB) and a drive to put in that too. Fill it up with the really important stuff you can't afford to lose, then disconnect it and leave it somewhere apart from your home so that if you have a disaster (a fire, a burglary, a virus attack, whatever) your pictures are safe. Slip it into your bottom drawer at the office, leave it at your brother's house, whatever. Then you can rest easy.
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