We describe the spectral characteristics of the radiation scattered by two-level atoms (quantum dots) driven by a strong external field, and coupled to a photonic crystal radiation reservoir. We show that in the presence of strong variations with the frequency of the photonic reservoir density of states, the atomic, Mollow, sideband components of the scattered intensity can be strongly modified. Consequently, a weak optical probe field experiences a substantial differential gain in response to slight variations in the intensity of an optical driving field. We suggest that these effects may be of relevance to all-optical transistor action in photonic crystals. Using a specific photonic crystal heterostructure, we suggest that an all-optical microtransistor based on photonic crystals may operate at less than $100\phantom{\rule{0.3em}{0ex}}\text{nW}$ switching threshold power. Collective $N$-atom effects substantially enhance this optical switching effect. Near the switching threshold intensity, collective effects are manifest in the ${N}^{2}$ scaling of the intensity spectrum (reminiscent of superradiance). Above and below this critical region, the gain spectrum widens (linearly with $N$). This correspondingly reduces the switching time scales of the atomic system in response to external fields. Furthermore, the quantum degree of second-order coherence exhibits unusual features. Scattered photons display a variable degree of antibunching as function of driving laser field intensity and the photonic density of states discontinuity. We analyze the effects of the inhomogeneous atomic line broadening on the amplification process. We show, using suitable photonic density of states engineering, that it is possible to select a narrow spectral range around the central frequency of the atomic frequency distribution over which amplification and switching occur. This is done either by spectral decoupling of the active elements from the electromagnetic field (through the introduction of band gaps at specified spectral locations) or through incoherent pumping to selectively saturate atoms outside the spectral region chosen for amplification.