Home now..looked at CS2
OK...here's the drum...In
PS CS2 you can save your RAW image manipulations withoutout creating sidecar (.XMP) files if you choose. They will not be saved in header files (like Nikon Capture) but are saved in a separate database. To do this, in the RAW plugin, you need to choose the fly out menu from the settings drop down box. Choose preferences from the menu and alter the "save image settings in" drop down box from the sidecar default to ""Camera RAW database".
Here's a C&P from the Adfobe help file
In the Camera Raw Preferences dialog box, choose one of the following from the Save Image Settings In menu:
Camera Raw Database Stores the settings in a Camera Raw database file, generally located in the user’s Application Data folder as Document and Settings/user name/Application Data/Adobe/CameraRaw (Windows) or the user’s Preferences folder as Users/user name/Library/Preferences (Mac OS). This database is indexed by file content, so settings remain with the image even if you move or rename the image file.
Sidecar “.xmp” Files Stores the settings in an XMP file in the same folder as the raw file with the same base name and an .xmp extension. This option is useful for long-term archiving of raw files with their associated settings, and for the exchange of raw files with associated settings in multiuser workflows. These same sidecar XMP files can store IPTC (International Press Telecommunications Council) data or other metadata associated with a camera raw image file. If you open files from a read-only volume such as a CD or DVD, be sure to copy the files to your hard drive before opening them. The Camera Raw plug‑in cannot write an XMP file to a read-only volume and writes the settings to the Camera Raw database file instead. You can view XMP files in Bridge by choosing View Show Hidden Files.
end C&P
So...to cut to the chase...if you really want to avoid creating sidecar files when you edit a RAW image, you can store the changes in a central database instead.