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What Brill said. It depends on what type of processing you do. If PSE does everything you need to do, then you don't need to get CS5. But if you feel limited and want to try new things, then it might make more sense to upgrade.
At the end of the day, if you shoot in JPEG and do minor adjustments to color/sharpness/crop/etc., then PSE is more than you need.
The later versions of Photoshop mainly added more tools. As I recall PS7 doesn't have the healing brush, as an example. I use that tool constantly with portraits to remove blemishes, loose strands of hair, background/foreground wrinkles, etc. Chances are that if you used CS5 for awhile you wouldn't want to go back, but it's certainly not needed for most of us. I use Photoshop a couple hours most days but still use PS8 (CS1). I'm sure I'd be thrilled with CS5 if I used it, but I'm perfectly satisfied with the old version for my needs and will probably stick with it until I get my next computer.
MIG welders are awesome too, but that doesn't mean they're for everyone.
CS5 is an awesome tool, providing your doing tasks that take advantage of it. With no other input from the OP as to what kind of photographer they are and eventually want to become, it's impossible to answer the question.
I've been using Lightroom 3 and Photoshop Elements 8 strictly for unmasked sharpening. I don't see myself upgrading to CS5 unless I need work extensively with layers and doing some heavy graphic works on photos.
I updated from Photoshop 7 to CS2 only because I was forced to by a dead hard drive and lost original disks. Otherwise, I would still be quite happy on version 7. And I earn my living using Photoshop as a web designer. The truth is that they have added more bells and whistles but nothing you cannot live quite well without. Your money is better spent on a good raw converter like Lightroom or Capture One. Even cheaper raw converters like Lightzone or Bibble Light will do an excellent job and are quite flexible and powerful. I do most of my post processing in raw converters and final resizing and sharpening in Photoshop. Other than not being compatible with a few of the newer plugins there is nothing I miss by not upgrading any further.
The image below, shot raw on a Canon 10D was post-processed with a free raw converter (Scarab Darkroom) and then brought into Photoshop for final sharpening, saturation tweaks, and resizing and text.
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