I suffered an inexplicable loss of (built-in) iSight funtionality after installing Boot Camp, Parallels, and applying a system update. I don't know exactly what caused the problem, but I tried all the possible fixes I could find (zap PRAM, reset PMU/SMU, reinstall Tiger/Leopard, etc.), but none worked for me.
When I first received my iMac (17", 1,8Ghz, 2Gb RAM), the iSight would show up as iSight in System Profiler. Then, when I noticed it wasn´t working anymore, it was listed as a Vendor Specific product. I found a post where someone reflashed their iSight firmware in Linux with the Apple-supplied firmware (in the Core Services folder), and this fixed his problem for good. Unfortunately, I wasn´t able to contact him or replicate his procedure. I was getting pretty desperate at this point (it had been about three weeks since I discovered the problem) until I found this comment, which led me to this page, where I found the solution.
On the site is a small iSight patch that you drop in the top-level Library » StartupItems folder. This solved my iSight problem. I admit that I don´t really use my iSight very much, but I just can´t stand the feeling of having something not working "just because."
I would really like to find out how many people have returned their Macs to a service center to have their iSights replaced, when in fact it seems to be a software fault of some kind. I know it will not be the same for everyone, but this has worked for me, and I am very grateful to Matt for his research and easy StartupItems fix.
[robg adds: If you choose to try this fix, be aware that you're installing a kernel extension that could do nearly anything. Searching the net, however, feedback has been positive from those who have installed the extension, so it seems like a good fix to a problem I've heard about from more than one person. I have not, however, tested this one myself.]
Mac OS X Hints