Are files created with CS4 compatible with CS3?

Question

One of our customers has many copies of Adobe Illustrator/Photoshop CS3 installed and used. They now need 2 additional copies but can only purchase CS4. It is not possible for them to upgrade all of their current existing copies of CS3 to CS4.
The question that we have is this. Is Adobe Illustrator and Photoship CS4 fully compatible with Illustrator and Photoshop CS3? These people all work together. Can one person author an Illustrator or Photoshop file using CS4 and subsequently, can those who have CS3 work with the file with complete confidence that everything will always render the same (as it did in CS4)and work properly using CS3?

Answer 1

No...they are not fully compatible at all. In Illy you'll need to save
as CS3 and make sure you don't use any CS4 specific features.
In Photoshop you'll need to be careful as well but you SHOULD BE fine
for most things. No promises though.
InDesign, though you didn't mention it, is completely incompatible.
Files will need to be backsaved through the INX export feature and when
opened in CS3 it's very likely that text will reflow and any new CS4
features will be lost or badly mangled.
Caution is strongly in a mixed environment such as this.
Bob