You can use anywhere as a destination, because after you finish working on the image, you're going to have to reimport it into iPhoto 5 anyway. So you can save it on your Desktop if you want.
Jim Heid noted that you can also drag the thumbnail of a RAW image out of iPhoto 5, on to the Photoshop icon, and Photoshop will open your image in Camera Raw. But then you have to save it somewhere on your hard drive and reimport it into iPhoto.
Bottom line is, if you can use iPhoto's image adjustments for your RAW files, it's much easier. If you have to go outside of iPhoto 5, then you have to do more file management.