Thanks to Atlassian for added the v6.x feature to allow file editing directly from Confluence.
https://confluence.atlassian.com/doc/confluence-6-11-release-notes-953678666.html
But limiting the editing application to whatever the default OS application is an annoyingly shortsighted. 
For images, what I use for viewing images and what I use for editing are different tools. More often I want to open an image for previewing, not to edit. Therefore, the default is Google Picasa for quick previewing of images. It is significantly faster to open this tool than to open a graphics editor.

This limitation is just lazy programming. I would have been nice to allow the end user to pick one or more tools to select for editing. 