We have investigated novel femtosecond dynamics of cavity-polaritons in a semiconductor quantum microcavity. When the cavity-polaritons are excited with a strong resonant pump in the nonlinear regime, we observe a reduction of cavity-polariton normal-mode splitting (vacuum Rabi splitting) due to saturation of the excitonic transition. By time-resolving the vacuum Rabi splitting, we observe novel properties of cavity-polaritons, including in-plane momentum relaxation associated with inhomogeneous broadening, and the absence of exciton scattering when the superposition of the cavity-polariton modes corresponds to the photon mode. This coherent dynamics is compared with the off-resonance pump case. In addition, we report no evidence of excitation of higher levels (n greater than or equal to 1) of the Jaynes-Cummings model.