Thanks, David. I had a feeling that was the problem so I wanted to check. It's a pity, because it vitiates the feature a great deal. I don't recall the same problem with CS Review, but then I also didn't use it much as I had little application for it at the time. Illustrator has its embedded PDF that could be used for a web preview, but perhaps if an INDD is saved with the maximum size preview that could also be a solution. At least 1024x1024 would be a comfortable size for viewing.
I've not tested a PSD with live text, but I assume the embedded comp would be what's displayed, so that should not be an issue.
[By the way, someone should have a strong word with the marketing folks. This limitation is not hinted at anywhere in the CC promo. Quite the reverse, in fact. Like the unexpected requirement to purchase tablet apps, which the promo says are "included", marketing missteps like this can backfire badly, as anyone familiar with the field will tell you. I've already seen negative reactions in various forums to what is perceived as (and is, in fact, even if unintentional) false advertising. Just because it seems like a minor detail doesn't mean it won't upset customers who feel they've been misled.]
