I Had the same error message. The problem seems to have been corrected by shooting a smaller JPEG file. Shooting a 2880 x 1920 file (about 5.5 mb) I can work in Photoshop Mix.
using iPad air iOS 8.0.2
I read another post that said the max file size is 20mb. Large DSLR photos are too big. I didn't try a medium size photo, but medium on my Mark 5 III is under 10 mb and should work as well. Anyway, regardless of format, it seems the app won't handle anything over 20 mb.