Let’s start general, shall we?
When a program’s preferences file becomes scrambled, all kinds of peculiar behavior can result. Buttons and functions don’t work. Visual anomalies appear. Things just don’t work right.
If iMovie starts having a bad hair day, suspect its preferences file. Quit the program, open your Home → Library → Preferences folder, and throw away the file called com.apple.iMovie3.plist.
The next time you run iMovie, it will automatically build a new preferences file. This file will have the original factory settings (for the options in, for example, the Preferences dialog box), but at least it will be healthy and whole.