From another post...on the Apple Site
I did try it and it worked like a charm !!!!! I love working in I movie has a lot going for it.
The issue is that most MPEG1 clips are not edit-compatible with quicktime, because of how the audio track is multiplexed with the video. But iMovie '09 supports several sony cameras that shoot MPEG1 movies. But only directly from the MPEG1 camera itself. If you've already sucked the movies into iPhoto, you'll have to trick iMovie into thinking its a camera archive, and cross your fingers.
Try this:
(1) create a new folder on your hard disk called FakeMPEG1Camera (the name here isn't too important).
(2) inside that folder, create a folder called DCIM (the name here, and capitol letters, is important)
(3) inside that folder, place a few of the MPEG1 movies (they need to end with .MPG)
(4) launch iMovie. Choose File > Import... > Camera Archive...
(5) navigate to the 'FakeMPEG1Camera' folder. If your clips are importable, the 'DCIM' folder should be grayed out, and the bottom of the window will say 'Camera Archive Detected.'
(6) click 'Import'. The camera import window will appear, and you can import the clips. iMovie will convert the movie to an edit-compatible format (audio turns into PCM).
Not every MPEG1 file I've tried works, but many do.
If you have a Sony camera that shoots MPEG1, it's easiest to import the footage directly into iMovie while it's still on the camera... do that in the future.