It seems that old myths die hard, very hard. An additional tank WILL NOT!! help and 60 gallons is is just fine so don't waste your time and money trying that tired old trick it does not help, not for more than a few seconds anyway and then even this will be lost to the extra recharge time so NOTHING is gained. This has been covered many times before and the size of the tank will determine the on/off cycle of the compressor and not how long you can run a tool that exceeds the capacity of your compressor, you can not get more out of a tank than the pump puts in. TT, you say you have a 5 HP 60 gallon compressor? but what is the CFM rating? Do you have a regulator now or are you running straight tank pressure?
If you are running out of air, and it sounds like you are, then no regulator is going to make up for a lack of air from the compressor. Does the impact or cut-off tool start out ok for a while and then die down or does it lose power almost immediately? If it only runs a second or two before losing power then it could indeed be a regulator problem or (more likely) a line restriction. If the tool runs for a while and then slowly loses power along with a corresponding lose of pressure in the tank then the compressor is not producing enough CFM and the regulator is not the problem. Check the lines for a restriction and make sure there are no fittings ANYWHERE in the system that are smaller than the line.
Danny, nice set-up you did a really good job on that