One problem that plagues most of Apple's MPEG-reading programs (I can't pick up iLife'05 until later today, so I can't verify the case with the newest apps,) is that they won't handle single-track MPEGs. Most MPEG compressors have video and audio as separate tracks. Some 'multiplex' them in a single track. I know QuickTime 6 Pro doesn't like the multiplexed MPEG-1 files my Sony digicam records. If I want to use these MPEGs in projects, I have to use third-party programs to 'de-mux' them, then convert them into different file formats, THEN import them into iMovie.
I'm seriously hoping iMovie '05 fixes this with it's reputed MPEG import capability. (I'll report back later today when I get my copy.)