Yes, it's possible. You can even use it for webcam chat under Kopete IM (and other probably).
Firstly, the camera doens't present itself as a v4l (video 4 linux) device, so you need vloopback kernel module. This kernel module will create 2 v4l devices, usually /dev/video0 (input) and /dev/video1 (output).
You'll want to install coriander and libdc1394, probably the latest versions.
Plug your camera in, insert vloopback, and start up coriander. Click 'v4l' button so that coriander will start to export your camera via the vloopback module, and that's it, you can now use your iSight as a v4l device. Fantastic.
I'm far from an expert in this field, so if you have questions about this setup, you're best taking them elsewhere
Update: If you're finding that your colours are messed up and green and purple, you'll need to make a change to the coriander source (effects versions of at least up to coriander-2.0.0-rc1)
Thanks to Marc Roberts who pointed this out to me...
I have fixed the color problem that I had with Coriander. In conversions.c, I changed the enumeration in line 32 from
DC1394_BYTE_ORDER_YUYV to:
DC1394_BYTE_ORDER_UYVY
update:
Seems my blog software doesn't allow HTML in the comments, so here are some useful links.