You aren't confused, you're exactly right. The Photoshop upgrade is to the CS version. It has been rumored for months that PS 8 was coming soon. Clearly, the rumor was wrong and, in fact, CS is the new thing.
If you look at the new additions, you can see if any of them apply to you. From what I can see, the best features are the SWF export, the Text on a path tool and the color matching. All those are pretty awesome. Especially the color matching, which can take hours.
So I think it's a good deal.
Unless you already have Illustrator 10 and Indesign 2, you don't need the entire suite, just the PS upgrade.