> Camera raw update 3.7 is the last update supported by PSE3.
> Why is it not working with the D40?
This is a quote from the 3.7 ReadMe file:
"The latest version of the Camera Raw plug-in available for Photoshop
Elements 3.0 customers is Camera Raw 3.6. "
Not sure, but I think you can use the 3.7 DNG converter and then open the
DNG file with ACR 3.6.