If you open the PictureProject folder and then open the File Formats folder, there are two plug-ins for Photoshop a 'Nikon NEF LE' plug-in and a 'Nikon YCC TIFF' plug-in.
I dragged the 'Nikon NEF LE' plug-in into both the import/export and file formats folders of the Plug-Ins folder for Photoshop (just to be safe)
I haven't tried the NEF one out too much, but I just gave it a shot and it seemed to work alright. I imported it from the memory card using Picture Project Transfer (I'm a Mac user and iPhoto converts NEFs to JPEGs) then opened it in PS 7
There was a quick dialogue box that I am
taking a screenshot of as I type this. (cropped for no real reason...) It has various options for White Balance/Exposure Compensation. I haven't done any editing of images from NEF past that, but I know you can at least get them into PS 7