May i know if i were using adobe illustrator cs3, and i were to save it as an .ai file later using adobe illustrator to open it up would there be any hiccups? in short would there be backward compatibility issues when i were to work using illustrator cs2 environment, save an .ai file and open it in illustrator cs3 vice versa.

In my experience, there is usually an option to save it with high-compatibility with previous versions in a check-box on the "Save As" screen. In the event there is not, Adobe is usually excellent with backwards-compatibility in its PSD extensions. Also, since it is an image file, it's almost guaranteed. I'm not entirely sure but I'm pretty confident.