WHY is iMovie cropping 640x480 MPEG4 video when I drag clip to project?????

I don't think I am trying to do anything fancy.

My Sanyo camera takes VGA resolution video in MPEG-4. When I start iMovie '09 it asks me if I want to import the clip once I pop the SDRAM card in the USB slot. OK. I import the clip. iMovie checks for stabilization. Fine. After the clip is imported I run it and it looks fine.

I create a project and select standard aspect ratio. I select a clip from the imported video and drag it to the project window. The clip appears but I lose about 30% of the frame area around the frame because it's been cropped by iMovie.

I check HELP and locate the Project Properties... menu item and under "Timing" I set Initial Video (and Photo) placement to "Fit in frame". I click OK and retry placing a new clip in the project - SAME PROBLEM. I test an exported clip and the clipping is really there in the exported video clip.

The control settings in iMovie '09 do not seem to work with cropping control. Is there a rather large bug in iMovie or did I miss something obvious? It's just a 640 x 480 video. I would have thought it would be amongst the most common frame sizes aside from 320 x 240 outside of mobile phone video clips.

Thanks in advance for your help.


Mike