OK guys, I'm using a trial version of LR3. I right click on an image and I deliberately select edit in CS4 - not CS5 which is also installed (trial). The menu you show here doesn't come up - the usual EDIT A COPY etc appears.
What would have to be happening to enable your menu? In retrospect, it's possible that I may have chosen to render all my files to the new engine when I activated LR3 and thus, your rendering menu isn't applicable? I seem to remember being asked some such question after opening LR3 for the first time. (I've been using the Beta since the beginning.)
I didn't mean this to become a 'how to' on the interaction between LR3 and CS5 and I'm sure my question is answered elsewhere. However, the issue may be of interested to those trying to decide between the two apps.
I'm out of my office/home and don't have a computer with me (just an iPhone). The dialog screenshot was made with Lightroom 2.7 and Photoshop CS3. I don' know if Lightroom 3 displays the same dialog. I'll have a look tomorrow morning. The dialog you mention isn't unknown to me and I got the same one if I try to "Edit in Photoshop" from LR 2.7 to PS CS2.
I'll get back to you as soon as possible, sorry again.