Thanks a lot for the reply. I think the known issue relates to a predecessor camera to the one I have. I tried what was suggested and it sill doesn't recognize the RAW files. That said, I agree with you that it probably makes sense to use Aperture or Lightroom if I am going to be doing a lot of RAW processing. At the moment I am only getting my feet wet with it, so I wanted to try it out with iPhoto, but it looks like I'll need to upgrade. Thanks for the link!
I know the Aperture vs. Lightroom debate is an age old battle, but if I upgrade from iPhoto, is Aperture generally much easier to use than Lightroom? It seems more people are using Lightroom than Aperture, but I'm just a beginning hobbyist, so I suspect one will be just as good as the other for me and since I don't have much experience, I doubt I am going to have any particular work flow preferences at the start.