I use and create pngs on a daily basis in PSCS3 with no issue. They are not layered, but they work as a flattened image with a transparent bg. I would guess that you did not look over the list of accessible files when installing and that PNG's were not checked as a
PS file. I made CS3 the default for png's since that is what I use to edit them most. You probably have another program set as the default for opening them. The easiest fix is to reinstall, and pay attention to the dialogue boxes instead of just clicking OK. Also, did you buy it from the store or download from Adobe? My friend's version that was bought on CD did some weird stuff while my downloaded one was fine. Even if yours is on CD you should be able to download it from Adobe as if you are getting the free trial, and then input your serial number for registration.