Making movie projects had been a two step process, importing source files into collections and then selecting items from the collections into a classic project storyboard or timeline. The two alternate views of a project confused many newcomers. The purpose of collections was unclear.
To make things easier, the new Movie Maker doesn't use collections and has dropped the timeline view of the project. The simple choice of opening Windows Live means you're in a new project, in a storyboard view.
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 them all to settle in on your favorite. 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 didn't handle my animated GIF and m2v files. Of course it won't accept those protected by DRM (digital rights management) locks.
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 no more timeline view of the project.... at least not in the beta versions.
Different video apps handle clips of various aspect ratios differently. I spent years checking each new version of Movie Maker to see how it handled them. Did it pay attention to the tag in the file which said 'standard' or 'widescreen' or did it check and use the pixel dimensions? It took until Vista for Movie Maker to treat all different files appropriately,
Windows Live Movie Maker continues the trend started with Vista, adding black borders as needed to make the saved movie look good regardless of the shapes of the source files. The saved movies are standard 4:3 aspect ratio, with black 'letterboxed' borders as needed to show widescreen and other sizes within the standard sized frame. This aligns more with online video hosts than to large widescreen viewing screens.