Another option instead of using Adobe DNG Converter - try Import to Lightroom as DNG.
When you import to Lightroom you can just choose 'Copy as DNG'. Lightroom converts to DNG as it imports your photos.
Then you can easily open, edit, merge, etc your images straight from Lightroom to Photoshop CS5 without the ACR problems.
Just remember to check the Lightroom prefs for DNG Conversion compatibility so, it matches whichever version of Camera Raw you have - i.e. Camera Raw 6.6 for CS5.
Also, look at the 'Embed Original Raw' option. Embedding keeps another copy of the raw file inside the DNG so, there'd be basically two copies of your photo in each DNG - which of course, means huge DNG files. I'd leave this off and just keep my original CR2s in an archive backup somewhere safe and just use normal non-embedded DNGs as my working image files.