I'm trying to open my file in Camera Raw, but the option is grayed out and not available. I've tried from both Bridge and PS. Any idea what I'm doing wrong? Ironically, I had Camera Raw open earlier, but now it's not working. I've also tried rebooting my system, but that didn't work either.
You are trying to open a PSD file in ACR from Bridge. That will never work. I can guarantee you that it has never worked for you either,.
The only files you can open in Camera Raw directly from the Finder or from Bridge, are raw files, JPEGs and TIFFs without layers.
PSD files can only be opened in ACR if they do not have layers and only through the File > Open menu item within Photoshop, by setting Camera Raw in the pop-up menu at the bottom of said Open dialog box in Photoshop.