iLife '08's iMovie 7.x (sometimes identified as iMovie '08) does not offer time lapse.
Based on the last paragraph of
this Apple article, I don't think iMovie HD 5.x does either, so *Automator will be your best bet for a series of images using your Mac's software*.
If you want to consider adding other software for use with your iSight, you can also take a look those in the list here:
http://www.ralphjohns.co.uk/EZJim/EZJimpage7.html Some of these apps will allow you to make series of images or even stream surveillance images to your web page for remote viewing.
For help with your iMovie HD (v5.0.2) problem, I suggest that you search for help or post in the
Discussions > iMovie > iMovie HD Forum.
G5 DP 1.8GHz w/Mac OS X (10.5.6) PowerBook 1.67GHz (10.4.11) iBookSE 366MHz (10.3.9) External iSight