CS5 is as good as you can get. I don't know any alternative apps that are better then those in CS5, especially Photoshop CS5.
As for Dreamweaver, there are some excellent new features introduced in CS5, like full control over CMSs by connecting all files together making it easier to work with and see your changes in real time. There are also some new web services you can use as a part of CS5, like Adobe BrowserLabs for cross browser compatibility check. There's a new site management system, new "Inspect" tool for live view and, my favorite, improved code completion with integrated PHP documentation. There are also a lot of small tweeks and adjustments. My say is, if you want to make some money in web design business you go for Dreamweaver. Knowing that average project income for small business web sites is about $1000, Dreamweaver definitely isn't expensive. On the other hand, if you want to learn web design and don't want to spend money on Dreamweaver, you can always use Aptana Studio. It's free, Eclips based and has a lot of nice features, plus it's cross platform.
I've never actually used dream waver myself, but i hear a lot of good things about it. As for Photoshop, it's the most amazing photo editing software there is, in my opinion. It takes a little getting used to, but it's great once you get the hang of it. I would definitely recommend it!
Again, if you are on tight budget then and don't want to pay for some extra features you actually don't plane on using, just stick with your current version. Apart from CMS integration there's a new Live Preview and Live Code that makes it easier to understand your design with visually marking paddings and margins and lot's of other useful things, but you could always use Firebug, Chrome integrated code inspector or Opera Dragonfly for that. It's a little bit harder but you probably do that anyway.
On the other hand, if you have the budget to update (witch is much cheaper then buying it) then you should. It'll make you life easier.