Ugly Joe wrote in post #11110104
I've used Photoshop for a number of years, and can tell you that it is highly versatile - CS5 handles .CR2 files without having to download any plugins (I had to install a plugin for CS4 to handle .CR2's from my T1i - not so with CS5).
The Adobe site says Lightroom 3 handles RAW files, and it looks like most, if not all, of Canon's current line of DSLR's are on the supported list.
Lightroom and Photoshop share the same RAW engine. What really differs is their presentation of the functions. Photoshop's Adobe Camera RAW (ACR) is pretty straight forward and doesn't have the fancy UI that Lightroom does. This really boils down to user preference and either one will do a fine job of RAW conversion. Near the end of the life of CS5 you will also see the same thing that Ugly Joe is referring to where Adobe will not provide updates for ACR to support new cameras that are released by the various manufacturers. Up to now Lightroom has continued to provide these updates. If one does choose to go only with Photoshop there is a way around this. Adobe provides a free utility called the DNG converter which allows you to convert your CR2 files to the DNG format which any version of Photoshop/ACR can read. It is really not a big deal, easy to use and then once you have your DNG files the rest of the process is identical.
Adobe is not the only game in town when it comes to RAW conversions. I personally use Capture One Pro by Phase One. It doesn't come cheap but I feel it gives better color (particularly in skin tones) than the Adobe products. However, choosing a RAW converter is a personal choice as the leaders of the pack are all close to each other. It boils down to the user interface and how comfortable you feel with it. If you did a Google search for RAW converters you will see the wide variety of choices.
Ugly Joe wrote in post #11110104
I believe anything Lightroom can do, Photoshop can do as well - not necessarily the same in reverse. I haven't used Lightroom yet, so I can't tell you if it's simpler than Photoshop to get the results you'll be looking for - but, as you've been using Elements, I'm guessing the learning curve won't be too steep for either one, for you.
I don't necessarily subscribe to this theory that if Lightroom can do it, Photoshop can. This would be true in the grander scheme of things but not 100%. One of Lightroom's strengths, imo, lies in its cataloging capabilities. This makes finding an image a day, a week, a year from now very simple and efficient. Photoshop's browser, Bridge, can accept key wording but is not a cataloging system. There are many people that feel this is a waste of time, particularly when they first start out in the digital world. After you have tens of thousands of images one certainly appreciates the ability to go and search your database of images to find something that you might have shot a year ago. As with RAW conversions Adobe is not the only game in town though Lightroom does work reasonably well. This chart provides a good comparison of cataloging systems available and a high level snapshot of what they do.
Lightroom does a number of other things such as being able to produce web galleries, a print module, watermarking your images, etc. All of these can be done with Photoshop and/or complimentary plug ins. I spend most of my time in Photoshop as I don't use Lightroom for conversions. I have a set of actions I developed that will watermark my images and I don't have the requirement currently for the web gallery creation. I find printing from Photoshop to be satisfactory for my requirements.
There is only one person that can tell you which is best for you and that is you yourself. You know your work habits, how much you shoot and if that is in CR2 or JPG format. Both products have trial download periods and I would seriously suggest that you take advantage of this when you have the time to commit to the evaluation.
You will get a number of different opinions here. They will all be accurate and correct for that person. The question is are they are right for you and only you can answer that.