When the next Photoshop release comes out, Adobe have the opportunity to really shoot themselves in the foot. If they decide to make the upgrade path from CS3 unavailable or overly expensive, my bet is that if the next version has compelling features, more low-budget users will either just stick to CS3 or stop buying legitimate licenses and go pirate.
By now it should be relatively obvious even to Adobe top brass that the CS3 to CS4 upgrade just was not worth the money to a lot of users. Given that I have very little faith in Adobe management in general, I think it is entirely within the realm of the possible that they'll dig themselves even deeper into the hole they are in by continuing to display utter ignorance of how the premises for their product has changed the last decade.
If I were the owner of a potential "Photoshop killer" I would aim for the next Photoshop release to pounce on Adobe.
(As for myself, I have a CS3 license. I looked at CS4 and I even tried to upgrade it at some point, but since I bought CS3 while I was in the US there are untold hassles with the upgrade and Adobe's ultra-slow and ultra-annoying web store. I gave up and now I am kinda glad I didn't waste my money on what was essentially a pointless upgrade. If the next Photoshop version doesn't have really, really compelling new features, I am not upgrading. CS3 does what it needs to do and the software is priced so exorbitantly that I cannot possibly justify shelling for a tool I only use occasionally)