I use both versions regularly: PS Elements 4.0 & PS CS3.
Elements 4 is missing curves and has limited layer styles options. Those are my biggest gripes. Maybe some of this is different in Elements 5.0.
There are numerous doo-dads that are missing that i take for granted since I've been using the full blown photoshop for so many years, and that is the biggest frustration to me.
However, as stated above, it's fine for day to day cropping, straightening, photo fix-ups, etc.
Photoshop is much better for being super creative, i.e. drawing from scratch. Elements is fine for general photography though.