Don't use the move tool when selecting your layers, use the direct select tool (the small white arrow) instead and then the shift and arrow keys. Once your layers are selected/highlighted then click on the move icon and align. Alternatively click on the move icon and then hold down the shift key and click the layers with your mouse.
BTW Check to see is there is a PhotoMerge option in CS3, there is in CS5, it is under File>Automate>PhotoMerge. I've used it to make a panoramic image. You just select your files, go off for a coffee (as it can take a bit of time, depending on how many images you have) and when you come back the images have been analysed and automatically stitched together.
This is a sequence of 5 images that I stitched together:
Regards
Nick