Camera Raw files are not editable files and can't be opened directly in Photoshop. They need ACR, a sub-program to convert your NEF to jpg, tiff, or psd so it can be opened in Photoshop.
Ah! Okay, makes sense now. I just learned tonight that some features are not available when using Camera Raw as a Smart Filter. One being Lens Profile Correction. So it makes sense to have have Camera Raw open right off the bat to make some tweaks first then continue on. I found the below on the Adobe website. Thank you so much!!
Note: The following features are not available when using Camera Raw as a Smart Filter (that are normally available in Camera Raw), primarily because they don’t make sense in the filter context: Workflow options and preferences, crop and straighten tools, rotation tools (rotate left/right buttons), snapshots, camera and lens profile corrections.
Well, to be honest, I didn't know any more than you why I can't directly open NEFs directly in PS, so part of my answering questions is my own curiosity in finding out exactly why. I'm glad it's cleared up for the both of us.
This tutorial site will hopefully answer even more questions. Imagemaven: You want to take better pictures, and maybe dabble in video too
There's a great section on Camera Raw.
If that solves it for you, and there is no further followup, would you mind marking the answer as correct so it closes the question?
If you really want to bypass the camera raw dialog, you can open a camera raw file directly into photoshop by holding the Shift key while clicking Open in the File>Open dialog.