I'm not sure what you mean that iPhoto can't handle RAW files jdepould, I'm just curious what you mean by that one.
iPhoto does let you work with RAW files in my experience. Though if you already have CS3, I'd much rather work with that than iPhoto because you have much better control. Still, iPhoto does provide the basics that you'd need to work with RAW (and since you're using OSX 10.4, you can save your RAW files as .tiff as long as you set that in your preferences). With iPhoto you're able to change the saturation, the colour temperature (e.g. white balance) you're able to adjust contrast, and sharpen, and these are the main things that I do when working with RAW.
I know a lot of people really don't like iPhoto, but I like it well enough, I think that it works really well for organization and the price tag is much less significant than Lightroom (which I don't have enough RAM to run) or CS3 (which is out of my price range).
I see no reason why you wouldn't try using the adjustments in iPhoto first if that's what you're used to working with (and have you seen the improvements in iPhoto '08? Looks like a few nice new controls are added
).