I run CS3 on a 2.26 Ghz processor, 2GB RAM without any trouble.  I frequently have Dreamweaver, Photoshop, Illustrator and Bridge open all at the same time.  No trouble with the system running slow or even crashing.

The CS3 is an upgrade but does a complete new install due to its internal makeover.  Previous versions of the product do not need to be installed if I remember correctly.