No, you have to pay less for an upgrade compared to purchasing a new version altogether. See details on http://www.adobe.com/in/products/photoshop-elements/buying-guide.displ ayTab3.html
Yes, most of the time adobe is the only place where the upgrade is cheaper. Try places like amazon and big box stores, which often sell the full version for less than the adobe upgrade price. Each version of PSE is a full standalone version. If you don't uninstall it, you'll still have PSE 3 after you install a later version, regardless of whether or not it's an upgrade version.