Your friend is full of crap... Firewire and USB are totally different. Now it is possible to capture vido and audio though USB, but it's not as good as firewire(most system overhead and such on USB)
I really don't use Windows Movie Maker as I think it's junk(at least once you've been editing for a few years
) I guess your camera connects directly to your computer by USB, no capture card or anything between? Being USB, it probably requires some sort of drivers(never tired a camcorder with USB...) See if you could find any. Also, check your settings. I'm not quite sure why it would only have audio, though...
If you can use firewire, I strongly suggest switching over to that. It's a much better interface.