Really frustrated with how iMovie sees video files. I have tested 720p files recorded from 3 different cameras. Two of them have been able to played by the pad2. None of them have been recognizable by iMovie.
I ended up purchasing ReelDirector($1.99) after a few others were trying to address the problem and suggested its use.
I used our 720p test footage from a Canon 300HS. ReelDirector was able to recognize the video that was part of our last import. From there I rendered the video and saved it.
I fired iMovie back up and sure enough our test footage that ReelDirector converted was now listed and able to be imported for editing.
This does add an extra couple steps to any possible video editing workflow and ReelDirector unfortunately is slow when it comes to the "rendering" step.
The final footage saved after the rendering step did lose some quality, but it was still better quality than what the ipad 2 camera is able to record.
I have no idea if the developers of ReelDirector have any plans for future updates to what I think can be a very useful app.