Version of ACR: Do you have two versions of Camera RAW that PS is finding in a couple different plug-ins directories? I had this situation after running the ACR 5.3 Updater and had to get rid of one the older version.
CR2s valid RAWs: Do the CR2 files open in Canon's own DPP or are they damanged, somehow?
I have an XSi and PS works just fine with them and I always use a card-reader to offload things from the SDHC card.
I apologize for taking up space here, but I solved my problem.....I reloaded the images using Bridge via card reader (instead of USB to camera) and bingo! everything works just as it is suppose to. This was one idea I had not tried, and found in an older post. Thanks,