Your choice of which working space to use is indeed quite important for effective color management. Some of the most common working spaces are sRGB and AdobeRGB1998, because the closely mimic the gamut of monitors and inkjet printers, respectively. If you have not done so already, be sure to also take a look at this site's page on
choosing between AdobeRGB1998 and sRGB as your working space, and more fundamentally, on
color spaces in general.
So which one should you choose? There are many opinions, but perhaps the most mainstream is to
choose a working space which closely matches the color space of your intended output device. This way you minimize color distortion caused by
perceptual or relative colorimetric rendering during the color space conversion (from your working space into the output/printer space). Here's some example color gamuts for a mainstream photo lab printer (
gray) compared to sRGB (
white) and Adobe RGB 1998 (
black). In this situation, note how anything larger than sRGB would be overkill (although the astute observer might realize this image is just a cross-section of the color space at 50% luminance, but it still illustrates the point).
comparison of color spaces at 50% luminance
(example of where anything larger than sRGB might be overkill)
On the other hand, you are right to be cautious of using a working space which is larger than what your LCD/CRT monitor can actually display. Keep in mind though that many photo-oriented LCD monitors can actually output the full Adobe RGB 1998 color space, including the one I am viewing with as I write this. If you were using a monitor which can only output sRGB, then the worst that will happen is that working space colors outside the gamut of your display (likely the intense greens in the case of Adobe RGB) will be compressed to fit within your display's color gamut by Photoshop's color management engine. This would require a bit of a leap of faith on your part when doing any image editing, but is by no means a reason in itself not to use a color space which is larger than your monitor's.
If you do not use a color space which is similar to your printer, then there is really no way of fully utilizing the the printer's color gamut, which is also not a good option.