iMovie started asking the "generate thumbnails" question again at launch. I'm not sure what I did to fix it. I repaired permissions on the disk, rebuilt the iPhoto library several times with different options. Rebooted. Nothing made any difference. Then today, I sync'd my phone with a new video on it, launched iMovie, and it started seeing iPhoto videos again.
I don't know what made it quit, nor what made it start again. There are several discussions about this in the apple forums - they all have a bunch of random suggestions. I don't think anyone has figured it out yet.