No, just slow down a little bit. First of all, if you are using ACR 4.0 then you must have Photoshop CS3. If you go to the download page you can get version 4.6 which is the last version that was produced for CS3.
As far as the color change is concerned, you probably don't have your color management rules set up properly in Photoshop. ACR will export in one of three color modes. You need to know how to handle this. At the very least you should save your JPEG images in the sRGB color space. Then they will be compatible with the Web and with most commercial printers.
DNG is just a different file container for your raw image data. The most useful application of converting to DNG is if I have raw images from a camera not supported by ACR 4.6. I can use the most current version on the DNG converter to create copies that will be compatible with ACR 4.6. Some people will routinely convert their raw images to DNG, but I have not adopted that workflow.
Should I download the one that is just the camera raw update or the one that includes the DNG converter as well ?
How easy is it to set up my colour management ? Where do I find it ? If thats a little complex for a newbie like me, what do I do to set it up so that I am saving my JPG's as sRGB color space ?
So judging by what you say I dont need to worry about DNG
In CS3, it is under Edit/Color Settings. I don't know the right way to set up color settings. I have mine set to North America general-purpose 2. In the working space I have RGB set to sRGB IEC61966-2.1. I don't worry about the other ones. And in the Color Management Policies I have them all set to Preserve Embedded Profiles. It works for me, BUT I always have to remember to convert to profile before I save my final image. There are others who might disagree with how I have my color management set up in Photoshop. And they might have some better ideas for you. That is just how I set mine up quite some time ago, and I have just gotten used to it.
If you want to export from ACR in sRGB, click on the blue hyperlink near the bottom of the ACR screen and set it up there. Then you wouldn't have to worry about converting the profile later in Photoshop.
Whether or not you use the DNG converter is a personal choice that you will have to make. Many of the Adobe personnel seem to recommend converting to DNG as part of a routine workflow. I haven't adopted that policy for myself.
There is a book entitled, "Real World Camera Raw with Photoshop CSx", where x is the version of CS that you have. The original edition was written by Bruce Fraser, who has since passed away. The later versions have been edited and updated by Jeff Schewe. It is an essential addition to your library. It is available from Amazon.com. Don't even think about it, just get the book
Thanks Jim My settings are the same as yours in CS3 And thanks for how to do it in ACR...