Make Edit Original Use the Right Program
When you Option/Alt-double click an image, or do its menu equivalent - select Edit Original from the Edit menu - InDesign opens the selected image's linked original, native artwork in its originating program, ready for you to edit.
Sometimes, though, InDesign opens the original artwork in a program that wasn't used to create it or can't even edit it properly. It opens .jpegs in OS X's Preview, for example, or vector .eps's in Photoshop Elements. (I just tried it on my Windows laptop, and that's what happened!)
The problem is that InDesign doesn't have its own look-up table for which program created which file; instead, it uses your computer Operating System's (OS X or Windows XP/2000) internal file associations to figure this out. You can't do anything in InDesign to fix the problem, but it's simple to do so in your computer. The added benefit is that afterwards, when you double-click an image in the Finder or Windows Explorer (the "My Documents" window), the artwork opens in the correct program there, too.
Show Your Extensions
Neither OS X nor Windows shows file extensions to the user by default, even though internally, they see them and rely upon them to match them to programs. A piece of artwork might appear to you in your computer's directory windows as "forestscene" and you have no idea if that's "forestscene.jpg" or "forestscene.tiff" or "forestscene.doc" for that matter. Double-clicking them is kind of like a crapshoot, you don't know which program will open until you see the splash screen.
So the first thing to do is to change the default so your OS reveals file extensions to you as well as filenames, all the time.
In Windows, go to the Tools menu in any My Computer or Windows Explorer window, select Folder Options, click the View tab, and turn off (uncheck) the Hide Extensions for Known File Types option.
In Mac OS X, go to the Finder, choose Preferences from the Finder menu, click the Advanced panel, and turn on (check) the Show All File Extensions option.
Associate the Program with the Extension
Now that you can see all file extensions in the Finder or Windows Explorer, you can select an example file and change its associated program for all files carrying that extension.
In Windows, right-click any file containing an extension that's confusing InDesign's Edit Original (e.g., if it opens .jpg files in the wrong program, right-click any file that ends in .jpg) and select Open With from the contextual menu. In the Open With dialog box, click the program you want InDesign to use for files of this type (with this extension). If it's not listed, click Browse to see all your applications and select it there.
Before you leave this dialog box, do the most important step: turn on the "Always Use the Selected Program to Open this Kind of File" check box.
In Mac OS X, select a file in the Finder as described above, and choose Get Info (Command-I) from the File menu. In the Open With panel, select the program you want InDesign to use for Edit Original for files with this extension, and - most importantly - click the Change All button. (That doesn't actually change any files, it just changes the program association for all files with this extension.)
By the way, you can Control/right-click a file in the Finder and choose Open With there, too. The problem is that the contextual menu lacks the crucial Change All button.
To test your work, double-click the file in the Finder/Windows Explorer and see if it opens up in the program you told it to. Or, place that file - or any file with the same filename extension - into an InDesign document and try Edit Original. You should see the linked, original file open in the desired application.
The above routine will solve about 90 percent of your Edit Original problems in InDesign. Here are a couple tips for the recalcitrant 10 percent, which you'll most likely find in Windows.
Why? Because the Windows OS relies exclusively on file extensions, while the Mac uses file extensions more as a back-up, if the file itself doesn't contain any identifying information.
If you've placed two EPS files in a layout, one an older Illustrator document saved as an EPS, the other an older Photoshop file containing a clipping path (which needed to be saved as EPS, before you moved to InDesign), the Mac OS will know which program created which and Edit Original will work correctly, opening two different programs as needed even though both image filenames carry the same ".eps" extension.
In Windows, files can't carry this type of internal information, I guess; or maybe they do but the Windows OS can't access it. Regardless, your best bet is to associate EPS files with the program you're most likely to want to open them in.
For the occasions when InDesign opens the "wrong" program when you Edit Original for an EPS file, cancel out of that program, and edit the image manually. Either use the desired program's File > Open menu, or use a Windows Explorer window to right-click on the image filename and choose Open With, selecting the program you want to open it in. Make your edits, save it, and update the link in InDesign.
A similar issue occurs with PDFs. You probably have the .pdf extension associated with Acrobat Pro (or you should, that is.) But what if you save a layered Photoshop file as a Photoshop PDF - file extension .pdf - so you can retain vector layers as vectors? When you need to edit a placed Photoshop PDF in InDesign, which program will open when you Edit Original?
Again, Mac users have no worries here. InDesign will open Photoshop PDFs in Photoshop, and "regular" PDFs in Acrobat, or whatever program is associated with them by default. It's using internal file information to figure out which program should open.
The good news is that Windows users can impart the same intelligence to Edit Original by saving Photoshop PDFs with a PDP extension. That's an alternate extension offered only in Photoshop for Windows (the dropdown menu choice says "Photoshop PDF (*.PDF, *.PDP)".) When you're saving your file in Photoshop, you'll need to select that format, then manually edit the extension in the Save dialog box so it says .pdp instead of the default .pdf.
From then on, InDesign will open Photoshop (or whichever program is associated with .pdp) when you select a placed .pdp file and choose Edit Original.
Quick Tip for Overriding Associations
Sometimes you need to edit an image you've placed in your layout with a program other than the one you've carefully associated to its file extension. An example that comes to mind are placed PDFs - sometimes I want to open them in Illustrator, for example, to do some close editing work that's difficult to do in Acrobat.
You already know how to do this outside of InDesign: Use the desired program's File > Open menu, or drag-and-drop the file onto the program icon in the Dock in OS X, or right-click on the file in Finder or Windows Explorer and choose Open With.
But all these methods require that you locate that original image file on your computer. It can be a daunting task to locate if you've placed it from a server folder containing hundreds of images, or if you've placed it from my Mac's desktop, also containing hundreds of images. ;-)
Solution: Let InDesign find it for you. Select the image in your layout so its filename gets highlighted in your Links palette, then open the Links palette menu and choose Reveal in Finder (or Reveal in Windows Explorer). Ta-da!