That error message desn't sound correct, the Cas software should not tell you to insert the cam in your receiver.
When you return your Cam to your receiver is the Cam recognised and can you enter the menu?
What was the last Predator file that was loaded onto your Cam?
You could try doing a system restore on your computer, Start, All Programs, Accessories, System Tools, System Restore to a point before you updated to CIS 8.5a, but the problem seems to point to a problem with your Dummy Loader Card.
When you look at your Dummy Card can you see any obvious signs of damage?
Can you try your Cas 3 on another computer, to check if the Dragon Cam can be programmed?
The only real way to track down the problem is by trying everything atep by step, starting with checking that your Cam is still recognised in the receiver.
Then trying your Cas programmer on another computer/laptop.
Then if it is still having problems you have to check the Cas hardware, if possible, by switching components, ribbon cable, dumy card and finally the Cas programmer itself to discover where the problem lies.
Of course to do this you need to know someone who also has a Cas 3 programmer.
Usually the problem with the dummy card is from first time users who have either inserted the dummy card upside down or have not inserted it far enough, as you are experienced in using the Cas programmer I have ruled this out.
Please keep us updated with your progress and if you can't get it to work a cheap option would be to use a Dragon Loader Card, as the Cas 3 can also program cards.