When using the converter, you can specify the DNG version to convert to. Personally I haven't used the DNG converter in a long time, thus I can't say what the exact DNG version supported by CS3 is, but if you stick to the right version, CS3 can open it. As far as I remember, the converter tells you about compatibility levels in its help.
As Greg already said, you can just as well buy Lightroom, and for the few occasions when you need Photoshop (for instance when you want to use "Edit / Transform / Skew"), you let Lightroom render to a DNG, edit the DNG in Photoshop, and finally finish it in Lightroom. That's what I do.