CS2 was devided into Photoshop and Imageready, where Imageready was for animation only.
CS3 has merged Photoshop and Imageready into one program. Creating animated gifs isn't as easy as it was with Imageready, but it is still possible.
Opening an animated gif
In the past you could open an animated gif the same was you opened any other file. But in CS3 you have to "import it", the same as you import video files as separate frames.
File -> Import -> Video frames to layers... -> browse to the folder containing the gif file* -> Select the file you're looking for and hit "load" -> Select the options you want and make sure to select "Make frames animation" -> hit "ok" and the gif will be loaded into photoshop CS3**
* It's possible that the gif file isn't shown. In that case, type *.* as file name, and press enter. This way all files will be shown, including the .gif files.
** It's possible that the picture will contain several layers, but doesn't have a scrollbar to scroll through the different frames. In that case go to "window" at the top, and select "animation" in the drop-down menu.
Creating an Animated gif
When you open photoshop, it always remembers the last settings. Since you haven't used the animation option before, this isn't shown by default. Go to "window" at the top, and select "animation" in the drop-down menu to open the animation-window. Now Photoshop CS3 works similar to Imageready from CS2. You can make adjustments to layers, create new layers and link certain layers to certain frames. Note that every new layer will be automatically be made visible in every frame.
Follow what LA-384 said, and in your animation window, have two frames. One for the first image, and the second frame with the second image. Click the frist frame and then click tween(looks like 2(or 3) circles on the lil toolbar of the animation window). A new window will pop up and have it tween with the next frame and add as many frames as you want(default is 5). This is what causes the "fading" effect. Now all you have to do is play with the timing to get it just how you want
one important thing to remember; Gif can only use 256 colours maximum. Transparency takes up 1 colour spot. So if you're using 2 pictures with different coloursets and everything blends in, your gif would be of low quality. If you are able to minimize the colours of both pictures, it might look nicely.
If you want to save animated gifs, you go to;
File -> Save for web & devices -> change the "preset" to GIF -> change the amount of colours to 256.