I think the initial conversion should be done using Nikon software.
However if you already have image editing software, I would suggest to use the free ViewNX to convert to TIFF and then edit in your program of choice. I thus believe that the Nikon software still does a better job in converting their own NEF files than other third party's products. I have not compared PS CS4 with ViewNX, but when I compared CS2 to ViewNX, I found the images converted by the latter are sharper with more vibrant/warmer color. If you plan to perform a lot of modification and editing that go beyond the basic changes in exposure, WB, etc, then you need to buy CaptureNX or Photoshop, or whatever to do that. If you just want to do basic modification and then convert to JPEG/TIFF, ViewNX is great b/c it is FREE. ViewNX is free but you need to pay to get CaptureNX2.
