Why can't I see my iPhoto files in iMovie?

Question

[DISCLAIMER: My question is short, but my details are not. This is going to be a LONG read, but I wanted to make sure I provided all you helpful people with as much information as I could so that I could receive the best possible solution. So your patience and assistance is greatly appreciated!]
In iMovie [version 4.0.1], when I click on the Photo button to import pictures into my project from iPhoto, the following error message appears: "No photos were found. To use this feature, you must first create a photo library using iPhoto version 2.0 or later."
However... I AM using iPhoto [version 4.0.3]... with a HUGE Library containing 2000+ images and several created albums. These features work just fine within the confines of that program. They just aren't integrating with iMovie correctly. So... why can't I see my iPhoto files in iMovie?!!?!
FIRST ATTEMPT:
When I checked iMovie help, all it said was "You must open iPhoto at least one time on your computer to be able to access your iPhoto library from iMovie." I've obviously done this, having used the program plenty. Didn't work.
SECOND ATTEMPT:
When I checked this forum, the closest thread I could find that was similar to my problem suggested deleting the iMovie preferences file [com.apple.imovie3.plist]. It was later added that deleting the iPhoto preferences file [com.apple.iphoto.plist] as well had solved the problem immediately for that user. Tried it. Didn't work.
THIRD ATTEMPT:
When I checked the Apple Info site, their main solution was to try recreating the AlbumData.xml file which is used to populate the photo listing. Now this file can usually be found in the iPhoto library folder and I know how to recreate it. But THIS is where I think my main problem lies.
Unlike most users, my iPhoto Library is actually located on an external hard drive under "my hard drive name"/Pictures/iPhoto Library. When I checked this folder for the AlbumData.xml file , it simply did not exist. So as a test, I created a new iPhoto Library also on my external hard drive but the AlbumData.xml file was not created with it. I opened up iMovie just to see if it was able to browse the iPhoto library properly. But it still didn't work.
However, when I created a test iPhoto Library directly onto my Mac's hard drive, the AlbumData.xml file was indeed created with it. And when I opened up iMovie again... lo and behold, the iPhoto library finally appeared. It worked. But unfortunately, this solution still doesn't help me at all!
Thing is, I don't have enough space on my Mac's direct hard drive to move my entire iPhoto Library there (where it works). That's why I am using an external hard drive to store (more space). So is there ANY way I can keep my iPhoto Library located on my external hard drive and have the library, albums and files recognized in the other iLife applications like iMovie???
I feel I've tried everything, folks Could someone please please help me?!!?!
[my specs are listed below if that helps any]
Thanks in advance,
a very disgruntled wizkid :\
PowerBook G4 12" [1GHz, 256MB, 40GB]   Mac OS X (10.3.9)   GeForce FX Go5200 32MB, Matshita DVD-R UJ-816, Maxtor External Hard Drive [250GB, Firewire & USB 2.0]

Answer 1

My main concern at this point is that the AlbumData.xml file is unable to create itself onto the External HD. When I view the file [that I created from my test iPhoto Library on my Mac's HD] in finder, it appears to be a Final Cut Pro type of extension. Is something wrong with my External Hard Drive in that regard? Is it just incapable of storing those file types??? Hmmm...
As for the alias solution... instead of alias-ing the "Pictures" folder like you have, I've already tried creating an alias of the "iPhoto Library" folder on my External HD and placing it within the "Pictures" folder on my Mac. But when I tried to "Find Library" upon launching iPhoto, the prompt box would not allow me to choose the "iPhoto Library" alias I had created. So I couldn't open it.
To be honest, I'm not exactly sure how to create an alias correctly... or perhaps I should try alias-ing the actual "Pictures" folder (like you have) rather than just the "iPhoto Library" folder, but I don't know how to do that correctly either.
FYI... I am mounting my External HD before I launch iPhoto.
Also, I have also tried dragging the AlbumData.xml file that I created from the test iPhoto Library into my active iPhoto Library folder residing on my External HD. It would appear to be in the folder, but as soon as I clicked somewhere else in finder and than back into the folder, it would disappear. Not sure how to "point to it" either.
Karl, think maybe you could provide some hints on how to properly alias something or "point" to the AlbumData.xml file? I'd try it myself, but I don't wanna screw anything up by accident.
PS. As stated in the post above, there's a possibility my External HD is no longer Mac OS formatted... at which point I throw my hands up into the air and scream!
thanks for the tips thus far... everyone's so nice and helpful... I love it!
-the kid
PowerBook G4 12" [1GHz, 256MB, 40GB]   Mac OS X (10.3.9)   GeForce FX Go5200 32MB, Matshita DVD-R UJ-816, Maxtor External Hard Drive [250GB, Firewire & USB 2.0]