IMovie '09 won't recognize AVCHD Lite clips

I am using iMovie 09 (8.0.5) and was previously able to import AVCHD Lite MTS files from my Lumix FZ35's SD card (private folder) using Import from Camera. This no longer works and I wonder if it was an update that created the problem. When I use Import from Camera I no longer see my SD card or my USB-connected Lumix as a choice, just the iSight. When I try to Import Movies the MTS files are greyed out. Tried this on two different Macs. The only way I have to import the clips is converting them to MP4 files using Handbrake, but that is tedious as it only queues one at a time and I have dozens of little files.
Any idea why this is no longer working and what I can do to get these clips? The Apple Support site clearly states that iMovie '09 supports this camera.

G'day Steve,
We only use the SD card directly to transfer images from camera to Mac and PC.
The AVCHD file (.MTS) can be viewed and played by VLC without any problems - indicating OSX is recognising the file on the SD card.
However we have tried many ways of importing this file into iMovie and in all cases the file name is greyed out. As per the original post by JaneNYC, i Movie won't recognise AVCHD Liteclips and like Jane the Apple support clearly states that IMovie 09 supports our camera (Panasonic Lumix DMC-FT1) which is the forerunner of FT2.
I don't believe a clean install of OSX and iMovie is required as this would be a drastic move for the novice mac user especially when Apple specifically states that iMovie supports both JaneNYC's and our cameras.
Would you agree the problem is more likely to be with iMovie than OSX or are we not understanding something about importing AVCHD Lite into iMovie?
Cheers,
Ellen and Ian (New to Mac)

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