I am not having any issues with DSS on Windows 7 x64, at least nothing to the extent of what you show in the screenshot. I do occasionally get a corner or two which is blank in the final displayed image but this has never impacted the final saved image.
As for CS3 and the 550D, I don't think you can open the .CR2 files directly. I recall reading something about the version of cr2 files used by later cameras can not be read by older versions of Photoshop.
I get the same problem when trying to open the RAW files from my 500D. You will likely need to convert the files to DNG first and then open them in Photoshop.
http://forums.adobe.com/message/3020889 has a little more info.
I just found
http://en.kioskea.net/forum/affich-5...open-raw-files which has some details which may help regarding installing a plugin for Photoshop. I don't have CS3 installed at the moment to test anything though :\