Is the "Show Audio Waveforms" grayed out, or is it not grayed out but just ineffectual?
I have found that some iTunes songs don't display waveforms when the option is selected. So you should check to see if the function works with other songs.
Basically, when iMovie acts strangely, it often is helpful to try two basic maintenance procedures that are very easy to do:
1. Close iMovie and trash the file called com.apple.iMovie.plist found in User (the house icon)/Library/Preferences. iMovie will create a new .plist file on relaunch.
2. Before relaunching iMovie, do a permissions repair using the Disk Utility app on your Mac. It is found in MacHD/Applications/Utilities. Open Disk Utility, select your MacHD icon in the left pane, and click the Repair Permissions button near the bottom of the Disk Utility window. Then wait 3-4 minutes while permissions are being repaired.
When the above is done, relaunch iMovie and see if the wave forms will show.
Also, make sure that you have sufficient disk space for iMovie to function -- 25GB is oft recommended here. Updating Quicktime to current version (7.5.5, I believe) followed by a permissions repair might help as well. But do items 1 and 2 first to see if that cures the problem.