Just Some basic stuff

1: The Extract filter does a pretty good job. There are third party plug-ins too. Coral Knockout is worth a look.

2: You are in the Photoshop Windows forum. There is only one version currently available – version 9 aka PSCS2. Photoshop Elements is a less featured incarnation of Photoshop, which may or may not fit the bill. Have a look at the Product Features pages to see which would suit you best.

windows xp with about 5000 mb memory left?

By "memory" I assume you really mean disk space. Having only 5GB of free space will really slow down your machine. No HDD should be allowed to become more than 85% full. You have to allow an overhead for all the TEMP files which are created during use – not to mention a Scratch Disk for Photoshop (10GB at least).

Hard Disks are relatively cheap these days. Invest.

Best of luck with it.

Chris.