I would recommend against using Photoshop. Everything that automatically happens with Illustrator when creating artwork, takes excessive time and effort to do in Photoshop. You have to do colour seperation as you go, you have to work in a really high resolution, and you have to make sure you keep Anti-aliasing off (It causes blurry edges when printed)
I've already decided to use illustrator for it... You can make color design for tee shirts in Illustrator, too, right? Not just black and white*...