You probably need to reassociate the PSD extension with Photoshop. Go to Control Panel > Default Programs > Associate a file type or protocol with a specific program. Find .psd in the list, double-click it, and then navigate to and select Photoshop as the program to associate the extension.
Colin implied something, but I'll make it explicit:
The Edit Original and related commands rely on the association within the operating system between a file type (designated by file-name extension) and an application. All that Premiere Pro is doing is sending a request to the operating system to open the file with whatever application the operating system thinks should open that kind of file. So the fix is to tell the operating system what application to use.
Thank you! That did the trick!