Sounds like you changed the JPEG child document so that it can no longer save as JPEG (added layers, transparency, etc.) - ignoring the warning you got when you first clicked the child document to edit it.
And no, nothing changed with smart objects in Photoshop CC.
Hi Chris, thanks for the reply. It wants me to flatten it after editing (basically maintaining it's original state). After looking it over again, you are right, I have to flatten it in order for it to save. In order for it to behave the way I wanted it to, I have to first right click on the layer in the layers palette and "convert to smart object".
I assumed it was already a smart object when I dragged it into the doc but I guess not.
Chris, one last thing in regards to smart objects. When I make my edits to the smart ogbject and click ctrl+S it takes a really long time to save. very buggy. Any thoughts on that?
No bugs that we know of.
But when the child document saves, it may also be updating the parent document immediately after.
I know this is an old thread, but I'm just coming across this problem. When I work with smart objects at home using CS5, even if the layer I'm converting to smart object is a .jpg, when I go to edit the smart object it opens as a .psb, I can delete areas so that there's transparency, then I save and I see the result in the original file.
Now in CC (at work), if I try to follow the same workflow, when I go to edit the smart object it opens as a .jpg, which of course doesn't support transparency.
Could you please clarify why this would be happening if working with smart objects in CC has not changed?