How do I make Photoshop the external editor

I upgraded to snow leopard and now the "Edit in External Editor" option is grayed out in iPhoto. How do I choose Photoshop as my external editor?
I tried opening the pictures in Photoshop, editing them and then saving them - but the changes don't show up in the iPhoto file. How can I save the changes to the iPhoto file?

In the iPhoto preferences you set PS as the external editor - when you finish editing you save (not save as) - and the photos is returned to iphoto and the iPhoto database correctly updated to keep the original and the modified version
iPhoto has the capability to directly interface with any external editor - simply go to the iPhoto preferences (iPhoto menu ==> preferences ==> General and set the Edit photo option to in external editor - select the desired external editor and you are set - now when you edit photos they are sent to the selected external editor and when you are finished editing you save (not save as) and the edited photo is returned to iPhoto, the original is maintained in iPhoto and the iPhoto database is correctly updated.
If you want the option of editing in either iPhoto or the external editor after selecting your external editor simply set the edit in back to main window - now when you right click (control Click) on a photo you will get a menu which allows you to select either.

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