There are a few ways to do it...are you updating the PSD file from the UV editor mode? Or did you just save it as a .tga file?
If you just save the file from the UV layot, you can just make a new blinn in the hypershade, next to the color option click on the checker box, and then click on file, find your file and apply it to the color. Then just apply this hypershade color to the model and it should work out just fine.
If you are doing the PSD update, you should be able to go into the UV editor window with your layout and click on the update PSD network button.