Picasa is good, particularly as a viewer and for basic editing. I investigated it as something 'easy' for my wife to get along with.
You can alter the folders it scans by going to: Tools - Folder Manager. There are options available as to where it uploads the photo's, but I am not sure the exact location as I upload manually to files with windows explorer.
There is one problem with Picasa. It is very slow at viewing RAW or large TIF images. For that it is best to use Faststone. If your RAW image cannot be seen in the viewer (i.e. is not compatible) then use the Adobe DNG converter. This will convert your RAW file to the DNG format. This should also ensure future compatibility with future editing programs, but time will tell on that one!
As for editing I use Photoshop Elements 5 as it came free with my last compact digi cam I brought. Photoshop CS2 (the last version I used) was too much for my needs and the only thing I really miss is the batch conversion where you could record your macro. Still adding borders manually is not too time consuming for the amount I print so I can live with the $$$ saving and feel happy in my legal glow