A lot of cameras that take RAW photos include software for just that purpose. If yours doesn't, Photoshop is probably the best. I don't know if Photoshop Elements has anything available that is comparable to the Adobe Camera Raw software that comes in CS2 though.
The alternative is cheaper, but the quality probably won't be quite as good and it's a bit of a pain. You can get UFRaw for free which does a great job converting RAW images, and that can operate as a standalone program or a plugin for GIMP which is a free image editor. However, neither has any kind of useful noise reduction.
For noise reduction, there's probably two options here. One would be to edit the image using GIMP or something similar (perhaps paint.net?) by duplicating the original layer, blurring it, and applying it as a color layer. I don't know if that works in GIMP or anything else as well as it does in Photoshop.
The better quality alternative would be to get a program like Noise Ninja which can run as a standalone program. This is one of the best programs for removing noise without ruining image detail, though I'd still prefer to do it in Adobe Camera Raw.
I hope someone has an easier suggestion for you.