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In DPP, RAW and JPEG will both show up. The one that says CR2 at the bottom is RAW. Like previously said, check your camera setting. 
Unless you need some specific features, any Canon camera will do fine for you. A Rebel will be in your price range (T2i is one heck of a camera for the price) or you could get a 60d which will give you better ergonomics, battery, viewfinder, etc. Don...
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