I'm a little confused about the resolution here, I know the dimensions suppose to be: 320x480 points but what do I need to put for the resolution? e.g. 300 dpi?
I'm designing on CS5.
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Should my images be saved at a specific PPI?
No. iOS ignores PPI (pixels per inch) stored inside images. However, the pixel dimensions of your images do matter, so make sure you get those right. It’s also important to ensure your 2× images are exactly double the dimensions of your 1× images and that elements within the image are in the same positions—your Retina images should be identical content to their smaller counterparts, but with more detail.
Read the above article it's invaluable, if you're designing for iOS. Dimensions matter, the PPI is irrelevant.
iPhone4 retina displays are 960x640 with 326 dpi (ppi). http://en.wikipedia.org/wiki/Retina_display#Display