The Launch PSD Editor still works in CTA5 as it did in CTA4 but the issue here is that all the default embedded characters have been updated to the new SVG (Vector) format in CTA5 so PSD Export won't work. You can see that PSD Export still works by dragging the same character shown from CTA4 into CTA5.
So, to clarify, if you have a SVG (Vector) character you can't use the "Launch PSD Editor" option. However, if you have a Raster based character built from the PSD Templates then you can use the "Launch PSD Editor" and it will work just as it did in CTA4.
Please Note: The ability to Launch a SVG character to a SVG compatible editor is coming in a future update.