hey there 12frets,
i haven't found a "set" way to do things when mixing technology & art/creativity, but there's been a good bit of try this or that & see what works... also this is a project that seems like it will take some time, so take the time, you're trying something new. & learning by experimenting. that being said, here's a couple of thoughts....
1-create a new project for each song, much easier than trying to cut 10 or 12 songs out of on very long track. unless you have segues or a medley. export to iTunes, put into iMovie regular way from Media Browser. put enough space on performance track before & after actual song(3-5 secs) you can chop off in iMovie if needed.
2-another thing you could try is to record the entire MD track, then bring in the iMovie & try to slide the audio from the MD track around(cut a bit here & there as needed) to synch the two. then add chapters, share to iDVD. this may only work for iLife 08? don't remember if share to iDVD w/ chapters is in GB/iLife 06. if not using iDVD7/iLife 08 you can still export entire track to iTunes, bring into iMovie thru Media Browser & break up track into individual songs there.
i've done similar to what you're trying to do using FCE several times but not in iMovie, the process is essentially the same & it took some time. good luck.
