I wish it had happened six months ago, but for the past month or two editing clips from our Flip Video camcorder in iMovie 8 (on a MacTel machine) has been painless.
Today Apple provided official documentation on how to import the videos (mildly messy): iMovie '08: Pure Digital Flip Video MinoHD camcorders. (Directions are same for all FLIP camcorders.)
With iMovie 8 the imported AVI files are not transcoded, they can now be natively edited. I don't know about iMovie 7 and I've not tried on my G5 PPC machine.
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