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You need to import DV footage from either a camcorder or the standalone media files in order to begin to "make a video".
 
What I mean is can iMovie record movie footage using the iSight camera? We know it can: Video chats on iChat.

But, I just can't find the feature to record movie footage using the iSight camera.
 
Yes. Just choose the iSight from the camera dropdown and hit the button Record with iSight that appears in the video preview.
 
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