You know you are living large when you are working in Photoshop with dual monitors ”one for the document window and one for all the palettes. For those of us who don't have two monitors , my general strategy for arranging the palettes is to group them in such a way that I can access any and all of the palettes using the default Function key assignments. In other words, not every palette has a Function key assigned to it, but as long as a given palette is grouped with a palette that does have a Function key assigned, you can get to that palette without having to pull down the menu.
When I watch people working in Photoshop, two of the most inefficient habits I see include constantly moving palettes all over the screen, and overlapping the palettes so that sometimes a palette gets hidden behind another palette. In Photoshop 6 and earlier versions, I overcame this by arranging the palettes on the screen one time, and then always left them in the same position. I just left them open all the time. If they were in the way, I simply pressed the Tab key to hide the palettes and got them out of the way.
Photoshop 7 speeds things up with its ability to store palette locations as custom workspaces. By arranging palettes as needed for a particular task and choosing Window Workspace, you can create and access palette layouts tailored to the way you work. For example, you might want to create a workspace for image retouching where just the Brushes, History, and Color palettes are visible, and then create another for layout work that emphasizes the Layers palette. When you switch among tasks , you can switch among workspaces using the Window menu. To update a saved workspace, just save a new workspace with the same name and tell Photoshop to replace the existing workspace.