In XP Movie Maker was the main interface with your mini-DV camcorder. In Vista you had the option of using a capture wizard or Movie Maker. In the Windows Live version of Movie Maker, the interface is handled by other software. There are no features to capture video from a camcorder or audio from a microphone or sound card.
Check what you can use to import camcorder footage by connecting your camera with firewire or a USB cable and seeing what choices pop-up. Pick one. Try each of your options and settle on the one that works best. If one of them is a Windows Live Wizard, it'll tie you into the rest of the Windows Live software.
Once into the computer, you can add an impressive assortment of video clips to your movie project.... including dvr-ms, mpg, mod, vob, 3gp, 3g2, mp4, mpeg, mpv2 and others. I can use the video files on a DVD without copying them from the disc.
It won't accept everything or use them as you expect... such as animated GIF's not being animated. Of course files protected by DRM (digital rights management) won't import.
As you add pictures and video clips, they go directly to the project's storyboard and used in the sequence shown. There are no more collections as in earlier versions of Windows Movie Maker, and the timeline is integrated in a subtle way with the storyboard view of the project.