Yes, once and for all, Photoshop Elements CAN process RAW files.
Just like with CS2/3 you must have a version of the ACR plugin that is compatible with both your Camera's RAW files AND the version of Photoshop you are using. (In fact, its the SAME EXACT plugin that CS2/3 uses... just certain important functions such as camera calibration are missing when you use it in Elements.)
That said... I think the results are better, and more easily attained using the software that came with your camera DPP (Digital Photo Professional.) At least for me, ACR gives a strong color shift from Red to Orange, and without being able to set a camera calibration in Elements, it gets old VERY quick dealing with that.