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I just saw this thread today....

In Corel Draw, there's a function that enables text to wrap around an object....

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I've never tried doing this in Illustrator but I believe there's a function similar to this.

As to why PS strains in handling this type of workload,  bear in mind that PS is a pixel based program. And because of this, PS has to redraw every single pixel information of the text every time you edit or even move around the document for a better view. 

This explains why breaking up the text eases the workload on PS as the render machine only has to contend with the data on individual text layers rather than the entire, whole paragraph of text on a single layer. 

Which is why image work like this is best done on vector based programs like Illustrator. Being a vector application, the file data is smaller hence the image work is easily handled.