As far back as I can remember, photoshopserver.exe always runs when you run Premiere Elements, and is used for importing .PSD files, as you said.
I've killed the process and PRE still runs, but you won't be able to process Photoshop files, and probably menus might not load since those are Photoshop files. If I recall, you can rename that file and PRE will still start up.
The handle count doesn't go out of sight like it did a couple years ago when DivX was installed. Now that was a memory leak.
I've cramed two hours of video, with hundreds of titles, transitions, etc. with only 1 GB of RAM of which 96 MB is shared RAM for video. That's way better than what Premiere Elements had been capable of doing on my machine in prior versions.
Sometimes when I minimize Premiere Elements and then restore it, the operating system releases memory, which can help.
I noticed that with PRE 7 the total commit charge will max out at about 1.5 times my RAM. One way to cause loss conciousness is to copy and paste a large number of clips at one time when the system is low on RAM to begin with. But I digress.