Iphoto 11 and photoshop elements 10

i am a newbie.....i am using iphoto 11 and elements 10.  when i am working with a RAW photo in iphoto and designate external editor, elements 10 opens and i go to the RAW converter.  i then open the image which returns me to
the elements editor.  i then do my thing in editor and go to save....i hit save but then a "save as" box comes up and tries to save the edited photo as a new file rather than overlay the original photo.  it saves the edited photo in the  iphoto/library/masters
folder but does not overlay the photo in the originating album.  i then have to move the edited photo from the masters folder to the album from which it came..
is this the way it is supposed to work?  or am i doing something incorrectly?  i have set the elements 10 preferences to "save over original".
thanks for any help.
ed

You can't save versions with raw files. The converted file is a new image, so you will need to reimport it to iphoto as a new image. Versioning with external editors  in iphoto only works when you don't change the file format. (When you save over a tiff file, for example, while not changing its name and not saving as a jpeg or whatever.)
Please don't save that image back into the iphoto library directly. You risk corrupting the library and possibly losing your photos. Save it to the desktop or wherever before importing it.
iPhoto is just limited in some ways when it comes to working with raw, I'm afraid.

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