Having just bought a magazine 'Photoshop for Photographers' there seems to be a huge amount that you can do in Photoshop Elements (£70ish). You need to know what you want to do with your photographs. Elements will do allot but if you need to do layers and weird stuff then The Gimp would be a good and very cheap option (FREE). Photoshop CS3/4 would be fantastic but the cost is high at around £500.
If you want to go totally free then i would suggest Canon DPP software which is available from either the Canon disc that came with your camera or from the Canon website. This will sort out your Raw files and there are a few other utilities on the disc which are handy. The EOS Utility will let you see what the camera sees but on your PC monitor so if you're doing stuff on a desk top studio (like i do) then that's handy, or a laptop if you're out and about. There's also Zoombrowser EX which is a picture viewer/browser.
Then for image manipulation, adding text etc then The Gimp would be my choice. Although it's not as easy to use as Photoshop, it still has a huge amount of functions and you will soon get used to using it as there are thousands of tutorials on the web.
Another great package would be Lightroom (for PC). That will do most of it for you an is around £200 but check it out as it may not be enough for image manipulation.
Have fun with whatever you choose. I find the photo manipulation part of photography just as much fun as taking the pictured!
Enjoy