Edit in Photoshop CS5 Not Seamless

With Lightroom 2 and Photoshop CS4, when you would select "Edit in Photoshop CS_ " the image would automatically open in Photoshop without passing through Camera Raw first.
Now, with LR 3 and PS 5 whenver I cmd+e (edit in photoshop) an image, I get the Open dialog in Photoshop.
How can this be fixed? Is there a setting I have overlooked?
Thanks.

Hello,
I recently updated from PS CS4 to PS CS5 and Lightroom 2.7 to Lightroom 3.
Everything went smoothly and i'm very happy overall.
The only problem that i'm having is that now in Lightroom the "Edit in Photoshop" is greyed out.
I can still edit in Photoshop if i use it as an "another external edit program", but my question is how do i get the two programs aware again of each other?? So i can edit in photoshop as a smart object again. I updated ACR to the latest version.
Thanks
Jan
Message was edited by: JanGeloen

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