Still works here. Mac OS 10.7.5, AI 16.0.4
Are you certain the Photoshop image is linked and not embeded? (check the Links panel)
BTW - Mac 10.6.8
And yes it is a linked image that was added using the place command. It shows in the links panel as a linked file. I can click on re-link and it will update, but I have to manually click it as opposed to dynamic linking updating automatically.