Yeah, you should be able to record audio/video in iMovie 6 too.
Just throwing that out there, don't know what's wrong, sorry (except perhaps the obvious turning up volume).
Actually, is your input volume level turned up here? (System prefs)
Maybe your webcam doesn't have a built-in microphone? (I know it says that you have a SR MacBook in your signature, in which case there is a built-in microphone, but the screenshot shows Tiger, and it could be an older computer (haven't all SR MacBooks come pre-installed with Leopard?))