"Best" is relative.
NEF is a raw format of image data, meaning its a straight save of the photo data off a camera sensor. It includes all kinds of data, from luminance to chrominance/color to sharpness values to white balance. It's not actually an image until a "raw converter" interprets it. Each of the interpreters out there vary a bit, be it Adobe Camera Raw (ACR), DXO Optics Pro, Apple Aperture, Camera On, Nikon Capture NX, or several others. Opening the image in ACR won't look the same as opening the image in DXO.
Adobe Photoshop CS2 is really the end of what I'd refer to "Generation 1" digital photo software.
Don't use it. It's severely handicapped compared to current RAW-enabled photograph editors. In 2007-2008, we saw the rise of next-generation photo editing, starting with
Adobe Photoshop CS3 (and it's included
Bridge CS3 browser and
Adobe Camera Raw 4 plugin). If quality is important, you can't use Photoshop CS2 and get good results -- not compared to Photoshop CS3 or CS4. And it's not so much Photoshop as it is the modern version of Bridge and ACR. All NEF files have to go through ACR before they can get to Photoshop. You can pre-process/pre-tweak in ACR, and then further tweak in Photoshop. Adobe Lightroom 2 is another option. NEF, by the way, is the Nikon version of a raw file. Canon uses CR2 files, and other manufacturers use their own raw storage formats.
JPEG files are a lot like MPEG videos (used for DVD-Video), in that they are ideally suited for end-product formats, meaning they'll NEVER again be edited. Each time you open a JPEG and re-save it, you have to decompress and then re-compress the image. Depending on what the edits are, and how many times this is done, the image quality can be anywhere from near-invisible to completely ruinous. JPEG editing is very limited, as compared to editing raw files. JPEG's are stored as basic color and dimensions, while raw files are multiple types of data that can be augmented during the interpretation. Color adjustments in JPEG often lead to posterization or "banding" of the color palette. It's also near-impossible to correct improper exposures in JPEGs.
TIF files are ideally what you want to use for important images, as your "flat master". Keep the NEF files, of course, but a TIF is an actual image, it won't be re-interpreted differently from software to software. It can stand up to multiple edits, including resizing. Theoretically TIF is the best image, but understand in practice that nobody seems to care anymore. Even photo labs can't take TIF files anymore, you're more or less forced to submit JPEGs for print. So you'd end up with the NEF/raw for archives, the TIF for a post-raw edit master, and the JPEG as a copy of the TIF for making prints. I don't actually use TIFs much anymore, I mostly save NEF and JPEG only. Some people use PSDs as "layered masters", or DNG files (another raw format).
Going back to the NEF converting...
The best "tricks" are to learn the sliders in ACR, especially the one to reduce color noise on the 3rd tab, and then the various color slides and WB adjustments on the 1st tab. Don't first go to brightness/contrast, for example, but to fill light and black. Save brightness and contrast for last. Don't use the auto settings, but rather tweak them using your eyes. You may also need to do this on a good monitor, not a crummy laptop screen or overly bright/saturated LCD. Otherwise your prints won't look anything like you saw on screen.
Beyond the raw work, there's some things to do in Photoshop...
Sometimes adjust manual LEVELS adjustments (avoid AUTO), maybe a low-level unsharp mask (maybe 2 pixels, 30%), and sometimes some large-brush burning and dodging if needed. That's really all I have to do for most of my images. The images look MUCH BETTER once processed, but it doesn't take too much to get them there. Most of my computer time is actually spent watching blue bars or hourglasses on screen, as it processes the edits -- and that's on dual- and quad-core systems!
You also need to size your images in Photoshop, before submitting to press. If you want a 8x10, then size the image to exactly 8x10 at 300dpi. It's under IMAGE > IMAGE SIZE menu. Down-size only!
If you need to up-size something, then you can easily lose quality. The included upsize methods used by Photoshop are very basic, often inferior. Specialized software works best at this, like OnOne Genuine Fractals or Alien Skin Blow Up. These programs also act as Photoshop plugins. I use
Genuine Fractals for all of my upsize work.
That cover everything for you? If not, post more questions.
