Techincally speaking, Lightroom uses 'Adobe Camera RAW' to process RAW files as well....so in that sense, it's no better or worse than Photoshop.
The thing with Lightroom, is that was designed to give you a streamlined workflow...giving you most of the tools that a photographer would use and taking out most of the extraneous stuff that is in Photoshop.
To your question, yes...you are loosing some quality if you process your images into JPEGs to further edit in Photoshop. On one hand, you are still getting the benefits of using the RAW format, because you can make adjustments with your software. But then part of the problem is that JPEG is a lossy format, as mentioned. Also, JPEG files are only 8bit, while RAW files are usually 16bit (actually 12 or 14 I think). A higher quality option would be to process the RAWs into TIFFs, then open those in Photoshop. But TIFF files are huge.
To be realistic, it's rather unlikely that you or anyone else would be able to pinpoint any of this loss of quality. So if you aren't going to be opening and saving the files, over and over again, you are probably OK to process your RAWs into JPEGs.
But yes, you can open them directly in Photoshop....via the sub program, Adobe Camera RAW. If you try that, and it won't work, it's probably because you need an updated version of ACR. It needs to be aware of your specific camera model, so Adobe puts out upgrades a couple times a year, including all the new camera models.