whidbey:
Welcome to the Apple Discussions. Photos you add to an album are only links to the original photo in the library. You are not duplicating files in doing so. The only time a file is duplicated is when you edit a photo and then there is a modified version created and placed in the Modified folder. You don't want to go about deleting files from within iPhoto Library folder via the Finder -
Don't tamper with files in the iPhoto Library folder from the Finder.
Albums in iPhoto are only virtual containers. There is no way you can find it and it's contents via PSE's browser. It does not exist outside of iPhoto. When you move a photo from one album to another and you don't want it in the first album you'll just have to delete it manually from that album. Remember if you delete a photo from the main library you'll be deleting every occurrence of it in your library.
If you're trying to use Photoshop Elements to edit a photo, you don't need nor want to open it via the Finder. Instead, use iPhoto's preferences to use PSE as the editor of choice when you double click on a thumbnail in iPhoto. The only caveat to that is if you create a layered image or otherwise create a file that requires you to save it as a psd file, you must either flatten it and save as a jpg without a name change or do a Save As to the desktop and then import it as a new file. Any subsequent edit on that psd file can be make normally.
Do you Twango?