Thank you for the reply. Its good to know i am not the only person seeing this. I did confirm your observation. I have both PSCS5 and PSCS5.1 installed. PS CS5.1 is automatically made the default editor and i have linked CS5 in as the custom alternate. When choosing to edit in the custom alternate the "edit in" dialogue appears-- when using the Default CS5.1-- no dialogue appears.
EDIT: With A little more research I did find out that everything is working as it should-- The Default Editor is not meant to show the "edit in" dialogue and will always apply whatever lightroom adjustments you have made (flattening the image to whatever format you choose in the preferences) -- you can however have full camera raw editability by choosing "open as a smart object" which will allow you to open up the RAW format within Camera Raw from Photoshop.
You can also have the "default" editor also saved as a custom external editor -- saving it as a preset-- and selecting the preset -- which will bring up the "edit in" dialogue.