Psi Dust is impossible to obtain due to an apparent swap of functionality.

[Trisscar05]

Namely that the only psi "rod" you can make initially is the Iron Rod Frame, which is supposed to be able to make psi dust by right clicking on dropped redstone dust, according to every source I can find.

Except that the quest book names the full completed Focusing Rod as the only means to obtain the dust... which you need to make the Focusing Rod in the first place. All causing me to think that the functionality has been changed or broken by something or other. Ended up cheating in a Focusing Rod to test, it was able to create the dust, now just going to cheat in the dust and move on.