This same problem happened to me. The iSight 'on light' turned on as soon as I started up my MacBook and had that weird green picture when I opened Photo Booth. Nothing could fix it... until I rebooted. Now it works fine and it's never happened again.
Have you tried rebooting? (Obvious, I know, but sometimes the best of us overlook such simple things )
My MB and my MBP are mirror images of each other. (drives are duplicates, same amount of memory) My iPod syncs just fine on my MBP, and only charges on my MB. Also, I can not get any of my other firewire drives to work on the MB.
I just fixed this on my new Dual Core 2 MacBook. I decided to brave the annoying registration on this site to comment here... My camera light was on but the video window was either all black (in iChat) or all green (in Photobooth).
I was able to fix this by powercycling my MacBook...