If one of the images you have selected for the Export is a Raw file this error can occur.  This is due to the plug-in not being able to create a Raw file.  You will want to change the export option to not save the file in the same format as the original.

Yes, PhotoTools uses supported versions of Adobe Photoshop (CS2, CS3, and CS4) as its processing engine. This is why a full version of Photoshop must be installed to use PhotoTools.