NEF files are Nikon RAW files. If you have a late model camera of any make try downloading and installing the latest Camera RAW plug in for Elements although unfortunately I think that the necessary plug in for the latest model cameras need Elements 6 or 7 to download and install. You will have to go to Adobes web site and look I am afraid.
Had a look on Adobes site and the latest plug in compatible with Elements 5 is Camera Raw plug in 4.5 which is works with the D40 so that is OK. Find it here:
http://www.adobe.com/support/downloa...jsp?ftpID=4000
I would print out the instructions so you can refer to them as it slightly long winded and you do not want to get it wrong. Hope this helps.