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It sounds like you are doing things correctly.
Go into Photoshop, select the Help menu and select About Plugins and make sure the Camera Raw plugin is listed there. Let us know what it says there.
Also let us know what camera your raw files are from, and if they were already on the PC when you installed the Camera Raw update.
Keep in mind that CS2 is not Vista friendly and Adobe has no plans to make
it Vista friendly. Only CS3 will be.
thankks John, i went into ps help / about plugins/ and camera raw was there. I am using a canon rebel xti and the raw image was on the computer before I loaded camera raw
Jerry, try going to the folder that has the XTI files in it and purge the cache for that folder. I believe that it is under the Tools menu.