[NormanLaw]

The only thing I can suggest is that ACR didn't install correctly. Can you check the ACR version - Help->Plug In->Camera Raw. The version that came with Elements 7 is 4.5.0.

I assume you did install the Elements version and not the CS4 version.

The installation instructions from Adobe are.

To install with Adobe Photoshop Elements:
NOTE: You must follow all of the new instructions in order to successfully install the Camera Raw Plug-in for Photoshop Elements.

1. Exit Photoshop Elements
2. Open the download file and double-click CameraProfiles.exe and follow the on-screen instructions
3. Open My Computer
4. Double-click Local Disk [C:]
5. Navigate to the location designated by your version of Photoshop Elements: (Please read directory carefully)
a. Photoshop Elements 6.0: Program Files\Adobe\Photoshop Elements 6.0\Plug-Ins\File Formats

b. Photoshop Elements 7.0: Program Files\Adobe\Photoshop Elements 7.0\Plug-Ins\File Formats

6. Move the existing Camera Raw.8bi plug-in to another location (for example, a new folder on your desktop). Ensure you keep this version in case you need to revert back.
7. Copy the Camera Raw plug-in, Camera Raw.8bi, from the download into the same folder as Step 5.
8. Launch Photoshop Elements.