First, for an overview of the master-slave relationship, click here. The difference is the order in which they are taken into consideration...the Master is looked to before the Slave. Thus, generally you should set the drive containing the primary operating system as the Master.

If you plan on installing a lot of programs, I'd install the OS onto the new drive, but if storage (movies, photos, etc) is your goal, I'd do it the other way around, making the larger drive the one designated for the primary activity.

As to the processor, don't worry about it...having multiple hard drives won't cause problems for it. Something you should consider, though, is your PSU...is it capable of powering an additional hard drive, or should it be replaced to prevent problems? Also, make sure the vents are clear and the new drive isn't blocking airflow...the more you add the hotter it can get, so the importance of cooling increases.

When it comes to the recovery CD, it's doubtful. Unless your computer came with a hidden recovery partition from which you can burn a set of CDs, that's a no. (The manufacturer will usually choose between the partition and including a set of pressed CDs, so I don't think this would be an option in your case.) The best thing to do would be contact the manufacturer and pay a nominal fee for a set of replacement CDs.

Finally, most programs, including Photoshop, require a license for every computer you install it on. Unless you have a second license, the installation and/or activation won't work. If you need to install it on another computer you can purchase another copy or look into some of the free alternatives which come close in functionality.

Hope this helps,
John