OK, I'm guessing you have already done this too, but to cover all the bases, have you installed the
iMac EFI Firmware Update 1.2 on your iMac?
I think upgrading to Snow Leopard is a good thing to do, but it should not be necessary to do that to resolve your problem, & should you decide you want to use Snow Leopard, check the lists at
Mac OS X v10.6: Printer and scanner software to make sure your HP printer/scanner is supported (in both modes) or you might be disappointed.
Because you get the same results with a test account, the problem has to be in the system domain. Assuming you have not added any software around the time the printer & iSight problems started appearing, the simplest solution might be to reinstall the OS. Otherwise, you will need to hunt down whatever is causing it, which could be a damaged system file, a corrupted system level preference or font, etc.
My guess is that the camera is not really in use by another app; the message appears instead because of an OS error. If I'm wrong about this, scanning Activity Monitor for a process that could be using the camera might help.