I can take a picture from lightroom to elements, edit and save, and import back in to lightroom. However, I have 2 issues. One is that it is saving to a folder other than the one I chose. Two when I import back in to elements the layers are gone, even though I marked, 'save layers'.
How are you doing this transfer from LR to Elements. What Lightroom commands are you using?
Normally, if you use the Lightroom command "Edit In...", you have no choice as to what folder the photo is in. Lightroom creates a .tif copy of your image in the SAME folder as the original, and then you edit this photo in PSE, do a SAVE in PSE (not SAVE AS), and Lightroom knows about the changes made in PSE and reflects those changes.
As far as I know, the layers are absent in Lightroom, but if you re-open in PSE, the layers should be there.
Regarding the choice of folders ... Lightroom gives you no choice. The easiest way to fix this is to change your thought processes, one of the benefits of the Lightroom Library Module is that you can organize without worrying about having photos in a specific folder.
I am doing the 'Edit in..." command from lightroom. And all is working well, but it really truly is going to a different folder than the original. That is not such a huge deal as the second question....
Yes, layers are absent in lightroom, but when I re-open in PSE all I see is 'background'. Hmmm?
This is not my experience. So please clarify "...but when I re-open in PSE all I see is 'background' " ... how do you re-open this file in PSE?
If you (again) use "Edit In..." then layers are gone.
If you go to the file in Windows Explorer or Mac Finder and open it in PSE (or open PSE and the File->Open), I see the layers. Of course, if you open the file this way, then any LR adjustments you made after the first PSE edit are not used.
Also, I'm using TIF files here, I haven't tried to see what happens with PSD files.