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I don’t know why two versions can’t be launched together, particularly if the executables have different names (photoshop.exe for PS7, photoshp.exe for PS CS2), but I suspect it is by design. If you think about how memory resources are allocated for Photoshop, I think it pretty much makes sense that two versions cannot be run concurrently; otherwise, they might actually compete with one another for resources, leaving neither to run very efficiently.
Another likely explanation is that the two programs load a number of files (dlls, for example) with the same names but which are, in fact, different versions. Conflicts would probably prevent one, if not both, instances of Photoshop from operating properly.
I installed the CS2 with CS in the same driver but differnet directory. I pretty agree with Ho that the two share a number of files which causes them cannot work together…
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