Hi DarylGS,
This is expected behavior, not a fault with the file. AI Denoise only works on raw mosaic data — Adobe lists Bayer and X-Trans raw files (plus Linear DNG, Apple ProRAW and a few others) as supported, and non-raw files such as TIFF and PSD as unsupported.
When you use Edit in Photoshop and save, Lightroom gets a rendered TIFF/PSD back from Photoshop, so Denoise on that returned file gives exactly that message: “Denoise is not currently compatible with this photo format.”
Workaround: run Denoise on the original raw file first, and only then send it to Photoshop. The manual Noise Reduction sliders in the Detail panel still work on the returned TIFF/PSD.
Adobe's supported/unsupported list for Denoise: https://helpx.adobe.com/camera-raw/desktop/edit-and-enhance-images/sharpening-and-noise/enhance.html