You need to 'convert' your NEF files to DNG so they can be processed with CS3. Always use the latest version of DNG Converter (currently 6.6).
I highly recommend that you update Camera Raw to version 4.6. This is the best version compatible with CS3. You should also check the preferences in DNG Converter, making sure that it is set to produce DNG files compatible with Camera Raw 4.6 and later.
Hope that helps.
Very many thanks. I have done as suggested