Well I got it sort of working. Restarting the iMac with the cable attached allowed cmd+F2 to work, however, when in target display mode, the iMac's screen flickers black every 5-20 seconds or so. It's impossible to work on.
I just purchased the Thunderbolt cable today, so it better not be bad.
So, I had to disconnect my wired keyboard from the iMac and connect it to the Macbook Pro manually after entering target display mode. Are you supposed to be able to use the iMac connected peripherals when using Target Display Mode?
With this in mind, I think perhaps it could be the short screen saver time setting on the iMac?
Trying to test, but now Target Display Mode seems to have stopped working entirely for the moment.