I don't have your model but here are some things to try.
1) Make sure you are powering the camcorder with AC power not batteries.
2) Open iMovie before connecting the Camcorder
3) Connect the USB Cable and turn on the camcorder
4) Open the LCD screen of the camcorder. Does it give you a choice of Pictbridge vs. PC Mode. If so, choose PC Mode.
5) iMovie import screen should come up.
Also, make sure you have installed all software updates. (/Software Update). If the software update requires you to restart your Mac, then restart your Mac before proceeding. Install iMovie, iLife, Quicktime, and Leopard updates.
If that still does not work, try taking out your SD card and putting in a USB card reader.
If that still does not work, put the card back in the camcorder and make a disk image of the card using disk utility. After making the disk image, try formatting the card using your camcorder menu. Then retry shooting some footage and importing.
By the way, using MPEG streamclip should not create files any larger than iMovie will create using an import function.