iMovie is able to import the videos, but converts them to a much larger file format in the process.
I really like the ability to intermix my photos and videos within iPhoto and generate slideshows that include both. Most of the solutions on the internet that I've found require a lengthy re-encode, which also results in a quality loss.
Luckily, I came across a thread that describes a near perfect solution that is completely free! Rather than re-encode the H.264 video and AC3 audio used by the camera, you simply have to convert the file format from MTS to MP4 (or M4V as Apple likes to call it). The audio and video remain untouched during the conversion.
This can be done with a freeware command line utility called ffmpeg. The command format is extremely simple (and fast!):
./ffmpeg -i [INPUT].mts -acodec copy -vcodec copy [OUTPUT].m4v
For those that don't enjoy running things from the command line it is also possible to implement an Automator application to handle the conversion. I've modified the Automator application from the thread mentioned above to automatically set the time and date of the new file to match the original file. This optional step helps keep things easy when importing into iPhoto.
I have also bundled everything you need into an Automator app called "CovertToMp4", including ffmpeg and the command line utilities needed to modify the date/time of the new files. Beware, if you modify and save the application using Automator it will overwrite the ffmpeg and utility binaries in the bundle. Be sure to copy them out before you save!
To use the bundled application, first copy the "ConvertToMp4" application to your "Applications" directory (it won't work in any other directory as it needs absolute paths to find ffmpeg). Then drag and drop the MTS files you want to convert on top of the application icon. A m4v file of the same name will be generated. These m4v files can then be imported into iPhoto. I've found that dragging more than 5 or 6 at a time doesn't always work.
I usually create a directory on my Desktop and copy the MTS files from my camera to that directory before doing the conversion. On my camera the MTS files can be found in the /PRIVATE/AVCHD/BDMV/STREAM directory on the SD card.
I've only tested this on my iMac, so let me know if you have any problems getting it to run on your system.