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Solution:

Are you sure you did not turn it off? Look over to the right, are the check boxes enabled? Each checkbox refers to a audio track. Yes, the video is considered and audio track too. You can enable and disable these at anytime. I usually use them to remove music, temporarily, while I am checking my voice-overs, etc.

If the " Video Play Through Camera " is enabled it sends all audio through the FireWire port and mutes it on the computer. This is a common problem with people thinking they have no audio or an audio issue.  Turn this off in iMovie preferences.