Is the tool torque directly proportional to the PSI or does it only operate within a certain range?
Clem, every one of the impact wrenches that I know of, as well as most other air tools, are
rated for 90 psi, but yes, higher pressure will give you more power. Now it
may decrease the tool's lifespan by increasing wear and possibly causing something to break, but it's quite common for mechanics to run 175 psi. If it does hurt the tool, well, that's just part of the cost of doing business.

But like DieselPower said, if you keep the moisture out and keep the tool lubricated like he said, it'll
probably last a long time. And if you keep it down to 90 psi and keep moisture out and keep it lubricated, it'll probably last a lifetime or more.
As for how they work . . . I don't know that I could explain that without pictures.

Most tools come with a manual that includes an exploded view of the parts, as well as the parts list. The air motors have a great deal in common, and all the impact wrenches I ever worked on had 6 vanes (or rotor blades as some manufacturers call them), but other air tools may have 4, 5, or 6 vanes. But there's two entirely different impact designs with a number of variations in each of those two. For instance, the IR231 has an impact mechanism that is lubricated with grease inserted with a needle nosed grease gun through the very back of the tool, while the CP734 is lubricated with non-detergent motor oil applied to one the side of the housing by removing an "oil" plug with a hex wrench.
The manuals are usually pretty good, but they don't tell you everything you sometimes need to know. I got several tools in for repair
after the mechanics who owned them tried to repair them themselves. As with most repair jobs, it's pretty simple after you've done it awhile; not so simple if you have not. For example: The IR231 manual, with exploded view, tells you to pull the air motor out of the housing or handle. It doesn't mention the fact that on about three-fourths of them you will have to heat that housing with a torch before the air motor will come out.

I got one of those in where the mechanic had gotten so frustrated that he had beaten and pried on it until he had damaged it so badly that it wasn't worth fixing. Anyone in that business has a propane torch handy for that purpose. The CP734 has a number of oil seals, much like miniature versions of wheel bearing oil or grease seals. When putting new ones in, they
must go in exactly straight or you ruin them. Easiest fastest way to do that is with an arbor press. A 3 ton arbor press is standard equipment in an air tool repair shop.
Air ratchets have one of 3 different kinds of ways to keep tension on the head or final drive. I got some of those, especially Snap-Ons, where the mechanic had replaced the final drive and then it didn't work. They used 2 concave washers and they had to be put in in the proper order and orientation and then it's very difficult to put enough pressure on them to get the snap ring in place
unless you have a press and the proper tools.