Hmm.
What i mean by cutting out what photoshop can parse is that there may be a certain type of object that either gets corrupted from the previous application (you mention Illustrator) and photoshop. A clipboard may contain the object you cut in multiple formats. If you are pasting between Adobe applications it is the AICB format and/or PDF. That the error is a tiff error could be that that is what Photoshop interprets non photoshop data too.
You say a G5 dual core intel xeon? I get confused is the Intel Xeon a G5? I have a quad core G5 as my workstationon and didn't know there was an intel core version?
What I can guess, and so far i can only guess, is that either you get corruption to the clipboard or from the clipboard. You must find a way do reliably reproduce the error to find out which.
Another wild guess would be a memory or disc error. If it is a G5 you may run into where your hard drive is getting worn out on a 24/7 graphics machine.
As i'm writing I also remember that photoshop does make more use of graphics card from CS4 and later.
One thing I find inconsistent is you originally phrase the problem as a CS5 issue, but you use Illustrator CS4? Do you have CS4 and CS5 open at the same time and switch not only between apps but also different versions of the apps?