It is indeed simple with PSE 8. PSE 8 provides a smart brush preset Reverse -black and White that do it in just one step. There are several ways in which you can achieve this result. However this one explained below is the easiest and least time consuming.
1. Open an image you want to edit.
2. Select Smart brush tool from the toolbar on the left.
3. From the combo box in top bar - select Reverse -black and White.
4. Now just drag the brush over the area you want it to remain colored. As you drag, you would see that rest of the image becomes black and white and the only part you selected remains colored.
Here is what you see in the Layers palette after making the selection.
Here are my Initial and final images :