I do have Lightroom 3. I do not have any Photoshop products. I do shoot in RAW. I do plan to shoot portraits professionally (studio & outdoors).
It's probably fair to say that portrait photography (as opposed to the more general class of "people pictures") presents a set of challenges not found in most genres.
While it is not possible to characterise the whole genre, portraitists are generally tasked with telling the truth, but not the whole objective truth. There are, of course, photographers who've made it their style to create photographs in a hyperrealistic "warts and all" fashion, where every pore and blemish on the subject's skin is paraded for all to see. At the other end of the scale, there is the romantic, soft-focus, painterly rendition that leaves everything to the imagination. Both approaches are legitimate, but very much a matter of taste and vogue.
Most of us, though, aim somewhere in the middle -- call it selective sharpness. We want the eyes, the hair, and (sometimes) the clothing to have a lot of detail, immediacy and presence. We also want the skin to look like skin -- we rarely want to make manneqins or wax figures of our subjects -- and want the shape and contours to remain identifiably and unquestionably those of the subject. At the same time, we want to avoid calling undue attention to flaws -- the zit that was there on the day you took the picture, but wasn't there the day before or the week after, a roughness of skin texture that is very much at odds with the character of the sitter (subject), lines that show clearly in the photograph but are much less noticeable when you see the sitter in person (particularly when emphasizing great age is not the aim of the picture), fine facial hair that you rarely notice except in detailed photographs, et cetera.
It is in removing or reducing those flaws that can't be addressed by lighting and posing that something like Photoshop and its like (and the plugins available for same) make their presence felt. Used properly, these tools will allow one to do away with the distractions without making the finished work look like anything other than a well-shot photograph.
Is it cheating? I don't know, but we used to do the same thing with pencils, dyes and bleach on the negative and the print back in the film days. My feeling has always been that a portrait is meant to portray the sitter (thus the name), and that there is a much greater subjective truth to be told in the portrayal than the mere objective truth gained by the process of fixing a pattern of light and shadow on paper. It is only very rarely that I find a "straight" photograph to be an adequate portrayal of the subject. I never actually lie; I just withold or gloss over those aspects of the whole truth that do no good for anyone. My opinion, then (and it is only an opinion) is that some use of competent image editing software is practically indispensible for portraiture.
As someone who uses Lightroom and creates a fair amount of portraits, but there's one big area where I find Lightroom's tools lacking and I jump to Photoshop: retouching.
- Cloning - Lightroom has a spot removal tool which allows for a circular clone-like function, but if you need to do true cloning to remove blemishes, stray hairs, etc. you'll find that the circular tool doesn't work so well.
- Healing Brush - The healing brush tool in Photoshop really works great for blemish removal; Lightroom can make some localized adjustments but doesn't have the healing/blending functionality.
- Liquify - I don't use it often, but the Liquify tool in Photoshop can be used for overall slimming as well as some facial feature adjustments and it doesn't have anything comparable in Lightroom.
If price is a concern, you can get the Cloning and Healing Brush features in Photoshop Elements which is under $100.
Lightroom is only a raw/jpeg image batch processor. It's like Adobe Bridge on steroids.
You'll need Photoshop if you want more granularity and fine adjustments. Lightroom is merely a tool to speed up your workflow.
It would also depend on your business model. Per print or per session (hundreds of photos).
I may be wrong but I believe Lightroom is aimed at making general, overall adjustments to photos like color and exposure correction. Retouching portraits often requires more fine control than that.
For example, you may want to sharpen the eyes and hair but leave the skin soft. For this reason I would think that dedicated software might be useful. Something like Portrait Professional should do the trick and won't break the bank.