An easy guide to firmware upgrade on Panasonic DMC-LX3 and using the LUMIX RAW codes on Windows.

If you are one of those happy owners of the Panasonic DMC-LX3, you may want to upgrade the camera to provide better and more accurate performance. The new firmware (v1.2) provides better white balance setting when using the DMW-FL220 flash, more proper setting of shutter speed, and more accurate EXIF information in JPEG files.
As with all firmware upgrades, it is important to follow the procedure carefully, otherwise you risk disabling the machine completely.
Preparatory steps:
1 . Get a Secure Digital (SD) card with 8 MB or more of storage that has been formatted by the camera. If you do not have one such card already, find a SD card and backup its content, then insert it to the camera and use the internal format option. Note: formatting destroys all the data on the card, you will need to copy the backed up content to it after firmware upgrade.
2 . Charge the battery fully. This is recommended even if you are using an AC adapter.
3 . Check the current version. If you have not upgraded the camera before and your camera was bought before 15 Jan., 2009, you probably have v1.1 or older. To be sure, turn on the camera and slide the vertical switch to REC (the side with a camera icon). Rotate the mode dial to P, then press the MENU/Set button (central button of the 4-way controller) to launch the meun. Rotate the zoom lever once to switch to the Utility tab (the utility icon on the lowerleft will be highlighted). Navigate downward with the down arrow to the SETUP menu. You can read the version number and see if it is lower than v1.2.
4 . Read the License agreement here. If you are using Windows, download the firmware here. Mac users should get it here. Extract the file LX3__120.bin from the downloaded file and copy LX3__120.bin to the root of SD card prepared in Step 1. Note that the root of the SD card is the place where you first see the content of the card (i.e. right after you have double clicked the SD card icon in My Computer, usually X:\, where X is the drive letter of the card)
Installation steps
Warning: make sure your camera is resting on a stable surface and that the battery and storage compartment have been locked securely. If you are using the optional AC adapter, make sure there is no scheduled power outage/maintenance at the time of upgrade and the plug has been inserted fully into the socket.
5 . Turn off the camera. Insert the fully charged battery in step 2 and connect the camera with the power adapter (if there is one). Insert the SD card with the LX3__120.bin file prepared in step 4.
6 . Flip the vertical switch to playback mode, then turn on the camera.
7 . The “Start version up?” screen will appear, press the up key then the set key.
8 . The upgrade will take approximately 2 minutes. It is highly recommended that you stay with it until the upgrade ends to guard it from curious pets/kids. Make sure the compartment door is closed and the power adapter (if any) is securely plugged when the upgrade is in place.
9 . After checking the version is v1.2 (Step 3 above), remove the SD card from the camera, delete LX3__120.bin and restore the backed up content (if any).
Installing the LUMIX RAW codec onto your Windows Vista computer is easy. Once you have this codec you can read .RW2 files natively with Windows Explorer and Windows Photo Gallery. To install it, first read the license agreement here. Then save this file onto the desktop. Right click the LUMIX_RAW_Codec_V10L015_Eng.exe and choose “Run as Administrator”. Follow the on-screen instruction.
Note that you cannot install the codec on a 64-bit Windows Vista. Depending on the processing power of your PC, rendering the RAW image could be instantaneous or painfully slow. Panasonic recommends that you have at least a Pentium III 800 Mhz computer for use with the codec.
Reference website: http://panasonic.jp/support/global/cs/dsc/download/LX3/index.html