You are pretty much right...
Simply stated: Raw is the negetive, like you said.
JPEG is compressed, meaning that the software identifies what it deems as repeat or useless info and discards it (this is a simple explanation keep in mind). So, you are loosing some info, supposedly redundant info, from that file. However, this makes it faster and takes up less room.
Raw is the most "pure" form of the shot and it makes sense that its the mode you would want if you know you are going to be post processing. If you dont know...still shoot raw just in case, or some cameras use JPEG+RAW where it takes a RAW shot compresses it and makes a seperate JPEG shot. So you have one of each. Clearly you need a larger media card for many shots of this.
I dont agree with size of photos being a determinant of whether you shoot JPEG or RAW, rather the post processing portion should be your determinant...JPEG has and always will make wonderful 8X10 shots. That being said, i only shoot RAW.
As for opening the files: there are tons of free RAW converters out there...i personally use CS2 but lots of people will use Nikons software, etc... find whats best for you. (check
www.dpreview.com you will find tons and can choose what you like best)
For now you may just want to shoot JPEG and learn photography and your camera without getting all bogged down by the post processing part...because lets be honest, its the shot that really matters. That way you can "plug and PLay and take more shots than you would be able to in RAW. Composition is everything, you cant post process what isnt there.
I second the statement that JPEG will never overtake RAW. JPEG's whole being of existence wouldnt allow it.
Hope this helped,
Jamie