You should be able to get it to run on that system, slowly, but should run.
"Photoshop 7 requires at least a Pentium III-class processor, 128MB of available RAM, a video card capable of 8-bit color (256 total colors), and a monitor capable of displaying a resolution of at least 800x600 pixels. Realistically, consider at least 192MB of RAM (128MB for Photoshop, 64MB for the operating system) and a video card with at least 16MB of on-board video memory."
Create a new user, assuming Windows XP, and tweak the settings to run only background services and software needed to run the OS plus Photoshop. Black Viper's Web Site