Photoshop cannot edit raw image data. That's why Lightroom or Camera Raw or some other raw converter is necessary.If you are using an older version of Photoshop (CS5 or older) the PSD file has to be created first. If you are using Photoshop CS6 or newer then the saving process will be postponed until the end of the Photoshop session. When you are finished in Photoshop and choose to save your work, the resulting PSD file should show in Lightroom automatically. Take note that you should use the Save option and not Save As.
I am using PS CS6 and LR5.
I just checked and the PSD is not in LR. I do not honestly remember if I chose Save or Save As.
1. Are you saying that as long as I choose to "Save" my image in PS it will automatically import the PSD into LR?
2. If so, will the imported PSD retain any keywords that were applied to the CR2 before it was exported for use in PS?
3. From PS, when I choose to save the PSD, since it is being imported back into LR, I need to save it to a folder where I keep all of my work, correct? In other words, I wouldn't want to just save it to my desktop, otherwise when I move it somewhere else later, LR will get confused as to where its new location is?
Instead of exporting the psd through the Export dialog, use Photo/Edit in ... and LR will do two things; it will send the image to PS (with the parameters set in Preferences) and will start to temporarily consider the folder in which the original resides a "watched" folder. After the RGB file has been edited and saved in PS, LR will update its catalog and preview to display the latest version. Thus you can seamlessly go back and forth
1. If you choose the Save option the PSD file should automatically be saved in the same folder with the original raw file. At least that is how it works on my system.
2. I'm sorry, I don't know the answer to the keyword question. You just have to give it a try.
3. You shouldn't have to worry about where the image is being saved. If you have your original images organized the way you want them the PSD file should be right in that same folder along with the original. One of your external editing options is to choose to stack the PSD with the original. That is what I use.
Just one other thought. What version of Camera Raw are you using with Photoshop CS6? You should be using Camera Raw 8.7 which is the latest version. You won't have the new features, but using the latest version will postpone the creation of the PSD file until your Photoshop work is completed.
By using Edit in, and taking the photo into PS, doing some editing and having the file update in LR, does this degrade the quality of the image in any way?
Not if it is a 16 bit psd or tiff in ProPhoto RGB space. If you put it into a narrower space and the subject's colors exceed that gamut, there will be some loss because the colors will be compressed to fit - however, most subjects don't have a gamut wider than sRGB.