Is your camera supported by FCE you can check here:
Qualified Devices.
Unsure if we have the same issue. In my case, after updating to FCE 3.5 and trying to capture I got this message box: "This operation could not be completed as there is no video". I was able to use the onscreen controls to start stop and rewind my camera. After talking to Apple Support, I ended up doing a fresh install and I am now able to capture the video.
Unfortunately it appears you need to do a reinstall. If still no luck call Apple Support Monday, you should have 90 days of free support from your date of purchase.