Ordinarily in photoshop elements when you open a 16 bit file your limited to working with a single layer, but with a simple keyboard shortcut (shown in video) you can work with 16 bit layers. I have not found a way to open 16 bit layered files yet. If you try to elements wants to either flatten the file or convert to 8 bits. However you can save layered 16 bit files. This should work in elements 3 thru 8. Probably not in 1 or 2.
http://www.youtube.com/watch?v=0O39Cdl9lM4&hl=en
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