" shouldn't it update what i was already working on though?"
-If you were working on a raw (proprietary) image file in LrC, then when you [Edit-in] Photoshop- Photoshop has to create a new TIF or PSD (as per the LrC External Editing preferences). The original raw cannot be edited (modified) in Ps.
-If you were working on a pixel based image in LrC (JPG, TIF, PSD) then you would see a dialog to choose the 'Original' or a 'Copy' to 'send' to Ps when you [Edit-in] Ps. Only the 'Original' (JPG, TIF, PSD) sent to Ps in this instance will allow it to retutn to the LrC Catalog without creating another file.