McCain's claim is accurate.
The Senate Labor, Health and Human Services and Education Committee Appropriations Report shows that Clinton and fellow New York Sen. Charles Schumer did lobby for a $1 million earmark for the Bethel Performing Arts Center in Liberty N.Y. Clinton and Schumer intended to use the earmark for a museum located at the Performing Arts Center that would commemorate the 1969 Woodstock music festival in their state.
The Woodstock museum -- officially called the Museum at Bethel Woods -- is due to open in the spring of 2008, but without the federal money. According to a statement on Clinton's website, the $1 million in federal funds was to be used for purchasing and borrowing exhibits at the non-profit museum as well as the audio-visual presentations, computer interactive displays and films. The senator's website says the exhibits will focus on the "post-WWII period and cultural, political, social, and significant historic events during this period including, in particular, the period of the 1960's and its continuing legacy."
When Clinton announced the $1 million earmark for the museum on June 22, 2007, she said: "These funds will help the for the Bethel Woods Center for the Arts continue to promote education, the arts, culture and tourism in the region." The New York senators were successful at including the money when the bill passed the Appropriations Committee. But the full Senate then approved an amendment introduced by Tom Coburn, R-Okla., that stripped the money for the Bethel museum and instead redirected it to the Health Resources and Services Administration for the maternal and child health services program.
During Senate debate, Clinton did not defend the Woodstock project, but Schumer strongly stood up for the Bethel project as an asset for an economically struggling county.
UPDATE: McCain's campaign used his remark for a TV ad that began airing in New Hampshire a few days later.
The ad begins with psychedelic music (the Doors?) and a swirl of colors to invoke memories of Woodstock. It then shows McCain's statement from the debate interspersed with a shot of him in a North Vietnamese prison when he says he was "tied up at the time."