Try moving one of these files to the hard drive where things work, and then do the Edit in PSE to see if the problem goes away.
I'm guessin you may have a permissions problem where the folder on the Iomega Disk doesn't have write permission.
It might be an issue you do not have enough free space left on the Hard drive from which you are trying to edit the images in Photoshop Elements.
Please check for the free space on that particular hard drive.
Thank you to all who answered! Tanuj's suggestion seems to have solved the problem for the time being. But I will keep note of these other options as well in case it turns out to be a recurrent issue that needs further work. Thank you all!
You are Welcome, Glad we could help.