When the game loads up, the first thing you need to do is calibrate the move controller and camera. Unfortunately, the so-called calibration darkens the video to a point where you can't make anything out but the glowing end of the move controller... making the video capturing portion of this game pretty much useless.
I called Sony support and after trying a number of things (deleting game files, restoring file system, etc...), the result was the same. After running out of ideas, they told me to submit something in the support forums... so here I am.
The camera works fine when accessed from the Accessories menu and in other games, and I've even tried another camera (had an extra one that came with another bundle). I've also tried it on the PS3 we have in our living room (2009 80GB model versus the 2007 60GB model in our games room)... still no luck.
To put it bluntly, this is crap. I could understand if it was some obscure functionality that didn't really affect gameplay too much, but come on, it's the first thing you have to do when the game loads up and it's a total FAIL. Having the camera recording the people at your party make asses of themselves (or totally rocking it) is the main appeal for most people purchasing this game. Without it, you're left with a game that judges you on how well you can keep you right hand in sync with an onscreen character... about as fun as... well, it just isn't fun at all. Sony needs to address this.
For the record, the game was purchased at Best Buy on June 21st, 2012, and is currently at V1.01 after downloading the 25MB update.