I have tried every possible solution so far from rebuilding iTunes music library to complete re-install of iLife11 - but still after all of this my iMovie no longer shows my iTunes music and instead says "open iTunes to populate this"
Other iLife programs like iPhoto sees my music library, this appears to be isolated to iMovie.
Solved: I had to restore from timecapsule about two months back in order to fix this, but it solved this issue. I believe it could have been due to software updates with itunes and imovie which were not in sync.
After restoring my system to previous versions of itunes and imovie I checked if iMovie could see the iTunes music library - which it did - I then updated my apps and restarted macbook