Hyper nurbs should be off for your uv export.
Your hard edges are where the polys meet. You will always have a seam and the biggest benifit of body paint is you can hide them…so exporting to photoshop eliminates that benifit since you cannot se what happening in real time… A way around it would be to paint those hard edges in BP after or mark them before so you can see where it will be.
You might find changing the type of Hyper Nurbs to Catmull-clark and changing the Sub divide UVs option handy when using a texture like this.
No clue about the cs3 stuff…dont have it.
/randy