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Sounds like the 'recovered' files are actually corrupted. Hopefully you have backups?
I have a Canon Rebel XTi and had a similar experience trying to import .cr2 files into Photoshop Elements 5.0 running under Windows XP. I get the same messages "wrong file type of damaged files". However, I can pull them up just fine in my XTi. I tried 3 differenc chips and had the same results. Until recently I strickly JPEG files. I switched once I started learning more about the benefits of using camera raw files in Elements. This is my first attempt at downloading .cr2 files. Is there a Elements 5.0 upgrade that will take care of this problem?
Your camera may not be supported by the version of Adobe Camera Raw (ACR) plug-in you have installed. Check the FAQs of this forum.