I don't believe you lose the Lr4 edits when moving to CS5, I know I don't. It asks you, or rather warns you.. and you have the option of rendering the image in Lr4 before it gets pulled into CS5. That's what I do.
That is what you need to do IF you use say PV2012 in LR and want to honer the new processing. When you use the Edit in Photoshop
command from LR, it is ACR that renders the image. In the example here, LR4 has newer processing capabilities than CS5’s version of ACR so you don’t get that new functionality. You do
get a warning. What you want to do is export (let LR render), then
open that in Photoshop. Or if you must use the Edit in Photoshop
command, make sure LR and ACR are on parity. You don’t have to upgrade ACR, you can always export and let your newer copy of LR handle the rendering.