I have an Olympus E-PL2 and am taking photos in raw. I have the codec downloaded from Olympus, so I can view the photo with Picasa in Windows, and it looks fine but a few seconds after loading the image, it goes and does something in which it looks like it desaturates the whole photo. What is going on? I know there are many posts asking 'what is a good raw viewer' but I'm looking more for a solution for Picasa if possible since I use it for all my photo management.
Sorry but you are confused. Picasa first shows you the JPEG preview that is embedded in RAW files.
It then loads the RAW data and lets it be converted by the codec. What you see then is the RAW file with default convertion.
In order to get something good from a RAW file, you have to work at it. IIRC there are questions here regarding matching the JPEG conversion and about why RAW files do not look so good by default.
We have this same question for Apple Aperture, Adobe Lightroom, Adobe Camera RAW, and possibly others I haven't found right now. In each case, the answer is the same: there is no such thing as displaying an "unedited RAW file". By definition, a RAW file is sensor data not in a useful form for display. The closest you might get is an RGBG matrix with linear color, which might look kind of like an image if you stand back and squint. Instead, what you're seeing initially is the embedded JPEG preview, and then when the preview changes, you're seeing the default conversion.
If you don't like the defaults, you can change them in most programs. In Picasa, I'm not sure you can very much.