Exactly. That's what we had to do before we were promised iMovie '08 would solve the problem! I've seen someone say it works with the dcr-sr300, which is the same camera, only with a bigger harddrive.
http://discussions.apple.com/post!reply.jspa?messageID=6664949
A very strange thing just happened. While I was writing the first post, I was downloading and installing mpeg-streamclip, and I let it start to convert my movies. Simultaneously, in the background, iMovie suddenly recognized my camera(?), with all the thumbnails appearing in the lower window. mpeg-streamclip was not even done converting the movies, but in iMovie, it looked as though all the movies were ready to be imported. Also, before mpeg-streamclip started the conversion, it asked for the Quicktime plugin, which I have backed up somewhere, but did not bother to install. I proceeded to convert anyway, although it alerted me that it needed to fix timecode breaks. I guessed it would be fine to say OK to that.
Could it be that I simply did not give iMovie enough TIME to recognize the camera.
Since I don't know what helped, I suggest doing exactly what I did. Try downloading mpeg-streamclip from the squared5 website mentioned above, have iMovie running and click on the first "computer" button on the camera's screen to connect to the computer. I had to wait about 5 minutes. I will try this again.
Well, you seem to need to give a 2004 2.5 GHz G5 about 5 minutes to recognize your camera. Everything comes to him who waits. I'm still not sure whether this happened simply because I had mpeg-streamclip installed, or if I never waited long enough before to let iMovie recognize my camera.
It'd be nice if someone knowledgeable solved the mystery.