Yes, Photoshop can indeed be a very, very powerful program once you get the hang of it all... I've been using it for years now... Combine the powers of Photoshop and Illustrator, and you can achive some ungodly beautiful effects with them. I mean, how else do you think I made my avatars? ;)
I just can't wait to get Adobe CS though... (the CS stands for 'creative suite' or something like that) It's like the MS Office and the new Macromedia products... The main programs are all bundled together for ultra-easy use and incredible interactivity between them... Which means that I can take my AI files from Illustrator immediately over to Photoshop in just a few clicks... and probably retain most of the layer data within them...
BTW, what's your method for getting extractions? Do you use the Extract command, or do you just outline what you want with the lasso tool? I personally make my outline with paths, then make a selection of that... so much more control that way...
For example, here's the original take of my current avatar, at half the original size, 300x300 (my 600x600 version was too big, even when zipped)... You'll need Photoshop to open it...