Yes, generally speaking you should use the SSD as your system drive, containing operating system and program files.
Your images and assets are only read when opened, so speed isn't as critical there.
But - and there is a big but here - 120 GB is smallish. It'll work, but watch it. Every application stores an incredible amount of user data under your user account (normally a hidden folder), and this only goes in, never out. It will accumulate over time, and sooner or later it fills up.
For instance, Bridge caches go there by default, and they aren't emptied out unless you do it yourself. Uninstalled Bridge versions still leave their caches behind, and you can end up with 20 - 60 GB of dead meat right there.
You get the best performance with scratch set to a system SSD. But scratch files get big, and you need to make sure you have enough free space. That's when a 120GB SSD can give you problems, unless you clean out your user account at regular intervals.