Well, I don't have CS5 and I didn't use PS7 -- I was using Elements back then.
But as far as the CSx upgrade goes, I did move to CS2, back when I was getting more and more serious about my photography.
Two things drew me to CS2:
First, I was shooting a greater volume of photos, and I wanted the tools available in CSx for automation -- actions and the ability to run batches of photos had become important to me.
Also, this was the time when I was moving into my first DSLR, which was also my first camera capable of shooting Raw. I had been doing my "homework" on the whole field of shooting Raw, and I knew that CS2 had the best toolkit for Raw processing, so the move to CS2 went hand-in-hand with the move to my first DSLR and Raw shooting/processing.
Since then, of course, CSx has added great new "stuff", but the features that were important to me are still meaningful -- a state-of-the-art Raw processor and automated tools that keep getting better are things that to me set Photoshop apart.
But, just be aware that even if you get the student discount it will still cost the same amount everytime you upgrade to a new version (CS6 is on the horizon). It is an application that is designed for professionals and "serious" amateurs, and even then it has more capabilities than most people will ever need. But for what it does, well it can seriously rock and roll!