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You probably haven't had anyone respond to your question because it has been asked and answered so many times. However, I will try once again.
Adobe Camera Raw must have a profile for every model of every camera for which it supports the camera's raw format. It is not a matter of just supporting a file type such as your CR2 files. ACR needs to know specifically what model you are using. This is a problem that has been created by the different camera makers. They are the ones who are creating these proprietary raw formats. No, they do not cooperate with Adobe. That is why Adobe has to wait for a camera to be available, then obtain a raw file from that camera, and then create the profile so that ACR will recognize that camera. That is also why ACR is updated about four times each year, to provide support for newly released cameras.
In an attempt to create a "common" raw file format, Adobe has developed the DNG (Digital negative) file format. Adobe is providing a free DNG converter. You always want to download and use the latest version of the DNG converter because it will be the one that supports the most cameras. The DNG converter creates a digital negative copy of your raw image. It contains all of the original raw image data. The image data is precisely the same data that was in the original raw image. The difference is that the DNG file has a "standardized" file header that stores as much of the metadata as possible about the image. Metadata is the information that records the changes that you make to your image when you edit it. Some of the image data is proprietary, and is therefore not available to Adobe. Obviously, that information simply has to be ignored by ACR. There are no XMP files associated with the DNG files. The information is stored within the DNG file itself so the XMP sidecar file is not necessary.
If you decide to go the DNG route you want to make sure you are using the latest version of the DNG converter. It will convert raw files from the largest number of cameras. Those DNG files can be opened by any version of Camera Raw from version 2.4 onward. Consequently, someone who is still using Photoshop CS still has the capability of working on their raw files even if they have the most recent up to date camera.
Photoshop Elements will utilize ACR 4.3.1 and any subsequent updates to the ACR 4.x releases. Judging from past experience, there should be another release soon. No one knows for sure. These releases are never announced ahead of time. ACR is not as robust in Photoshop Elements as it is in Photoshop CS3. It is the same plug-in, but a number of options are not available. It will support the same cameras, however.
You don't need to worry about matching the DNG converter version number to your working version of ACR. The only relationship is that matching version numbers will support the same set of cameras. But the DNG files that are created can be used in any version of ACR from 2.4 onward.
Anyone who is involved with digital photography and shooting raw has become a victim of the arrogance of the camera makers. The camera makers want to protect their proprietary format, and they want to promote the use of their software. Some of that software has to be purchased, so it is another way for them to make money. Until such time as everyone agrees on a common raw format, the photographers are the ones who are at the mercy of the camera makers. And there will be a continual ongoing updating process that we will have to wait for.
You're using a $4000 camera but trying to use the most basic Photoshop version? I would suggest you should just upgrade to the full Photoshop/CS3.
Sorry Jim and SuperMacGuy - but I think there is something missing in the reply that may relate to our abilities with the computer. I have a Fuji Finepix S9600, so not as expensive as Stephen's. I downloaded the Camera Raw 4.3.1 file, which I expected from the notes, to work with Elements 5.0 and my camera. However, the read me file refers to a Plug-Ins folder and this does not exist. My version of Elements 5.0 came with the Canon 8800F scanner but I don't see anything to suggest this is not the complete software package. So further instruction is needed. Do we need to create these folders? Is there something else what we are doing wrong?
I'm sorry, I didn't fully understand your question. Perhaps I didn't read it as carefully as I should have. In order for Camera Raw to work properly it has to be precisely in the folder designated in those instructions. I have never encountered the problem that you have encountered here. But I would suggest creating the entire folder structure and then putting the plug-in where it is supposed to be. Some of the Mac users have said that this cannot be done on a Mac. But I don't see any reason why it would not work on your XP machine.
Before you do that, however, in Photoshop Elements go to Help/About Plug-Ins and click on Camera Raw. This should display a window that will tell you what version of Camera Raw, if any, is installed. If Camera Raw is not on the list of plug-ins, then it definitely has not been installed, and I would try creating the folder structure that matches what is in the installation instructions. If that doesn't fix the problem then I would uninstall Photoshop Elements and try installing it again.
For what it's worth, I have the older Fuji S9000, and I have no problems with ACR. Everything works as it should.