Lightroom (Cloud) to Photoshop and Back - M2 Max

Hi,

I have seem similar posts but none has provided a solution to my issue.

I used to be able to use the 'edit in photoshop' feature on Lightroom (Cloud Based).  Once done in photoshop I simply flattened the file, saved and closed, then the file automatically transferred back in a stack to lightroom.

While this still works on one of my computers (a 2017 MacBook), it does not on my more modern M2 - same version of the apps, and same preferences set on both computers. Photoshops pops a 'Save As' box to me when I hit save and defaults to write a PSD file (?) in a temp edits folder. I can close  PS but the file does not appear in Lightroom unless I import manually afterwards. 

I have updated both applications; reset preferences - nothing seems to change it! Is there any workaround? This is driving me nuts. 

Thanks in advance!

Marc

MacBook Pro 14' M2 Max; Lightroom (Subscription) v 7.2 and PS 2024 25.5.0

Ventura 13.6.2