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I do not believe that the SE [free] version supports RAW at all. You should look at Photoshop Elements 3 - Organizer would do this job.
Photoshop Album does not support raw files. I think you can go for Photoshop Elements 6.
I have Photoshop Elements 4 and it does not currently suppport CR2 format. It does support some RAW formats, but you need to go to the website www.adobe.com/raw to find a list of cameras for which they support RAW.