Not sure what you all mean by 'WI-FI selected' in Network preferences. On my iMac 10.6 it has only Airport (Firewire, Ethernet) to choose from and to add DNS servers to. I added 8.8.8.8 to Airport DNS servers.
I have the same problem, and am trying to use Facetime on my iMac for the first time. (I use it on the iPhone.)
I switched Airport on, but have not connected my iMac to any network (all cables here, even printer).
And yes, I have tried restart, on/off, unplug external cam, etc.
Will try again, and again, but still my question remains: Where does it say WI-FI in System Preferences / Network?
Point of notice: I have changed my Apple ID password a few hours ago. Does this mean anything? iTunes account works fine.
Thanks
Paul