You're on the right track. You didn't do anything wrong. Once Adobe releases a new version of Photoshop Elements, they no longer support their old versions. Unfortunately, this means that newer cameras' Raw files aren't recognized by the old software.
There are a couple of threads in the Digital Photography forum dealing with the same issue, if you want to look there for some possible solutions. (I can search for them tonight, but my kids just came in the door, so I need to get to our after school frenzy.)
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