Unless you are doing CYMK work, I would recommend going with Photoshop elements.  Elements does about 90% of what Photoshop CS3 does.  Quite frankly, the other 10% isn't worth worrying about.

I agree with jjroland.  I didn't bother to upgrade to CS3.  When the MAC version goes to 64 bit (CS4), I'll upgrade, but not until then.