I recently got a new Nikon D5300 and shot in raw for the first time today. When I tried to view the images with photoshop CS4, a pop up window appeared stating that photoshop does not recognize that type of file, and therefore cannot be opened. Is this a compatibility issue of photoshop vs. camera files or something else? As a portrait photographer I shoot in RAW 90% of the time so I'm very desperate to get this resolved.
Yes, it's the never-ending struggle of software keeping up with hardware (cameras) and the eternal compatibility issues between them. Forces users into a never ending upgrade cycle to keep up.
Camera manufacturers use proprietary Raw files which are specific to each and every camera they make. Every camera is different. So Adobe has to retrospectively add support to the Adobe Camera Raw (ACR) plugin for each Raw file format on a camera by camera basis after the camera has been released to market.
The D5300 was first supported in Camera Raw 8.3
ACR8.3 is compatible with CS6 and newer. It is not compatible with CS4 and never will be.