Checking wikipedia PSP got vector tools in version 6, released in 1999. Photoshop got them also in version 6, released in 2000. So, yeah, PSP was pushing it early, but it didn't take that long for PS to get on the train too.
Yes, PSP 6 was the first release with vector capabilities. That's what made it so great for web development. I'm not sure what happened with the renderer in version 7, but the editor lost its pixel-perfect precision and became too hard to edit mixed graphics in a WYSIWYG way.
Photoshop's raster functionality was very limited? Photoshop surely has some of the best raster drawing functionality in any product? It's the core functionality.