This is probably one of the most ridiculous ideas i've had, but for a long time i've thought that if I take a photo at the largest setting on my camera, when I take it into Photoshop and scale it down, the photo will be more detailed as a result.

By scaling it down by about 50% or so.

Is this the case, that I increase detail as I shrink the photo down, or am I talking nonsense?

A bit of an idiotic idea, but i need to ask to set my mind at rest.

Depends what you shrink it down with, because the program has to guess what pixel to leave and what to get rid of (and how to preserve the detail the best it can). So if you shrink it too much, you'll get rid of a lot of the detail and it will become blocky.

So the better the program, the better it can shrink, to an extent. I've noticed theres a huge difference between Photoshop and Photoshop Elements for example

The photo may be more detailed if you take the picture at full resolution and resize in photoshop rather than shooting in lower resolution. It will depends on the process used by the camera and the relative quality of the resizing algorythms.(i can't spell, I know!)

Also, when you resize a picture down from full resolution, it will appear sharper at a per-pixel level. This is because pictures from a bayer-pattern sensor are never quite sharp at full resolution. (see http://en.wikipedia.org/wiki/Bayer_sensor) for details This is the big advantage of Foveon's X3 sensor (http://en.wikipedia.org/wiki/Foveon_X3.)

When you resize down, you have an image that is sharper per-pixel, because you probably have information from one pixel of each colour for each pixel of the final image, rather than sharing the information around between pixels, but you will not have increased the level of detail in the picture, rather decreased it. You can't generate information from no-where (hence the stuff you see in movies about enhancing images is pretty much a load of nonsense.)

This issue is why most people say that sharpening is necessary on all images produced by cameras. In fact all digital cameras sharpen by default. Again, this doesn't actually increase the detail recorded, but makes it appear less soft.