Yes it is possible to do this with MM although the technique is a bit
involved.
1. Make a new image "mask.jpg" of size 640x480 with full black fill. Paint
over white area where the blurred part needs to appear in the final movie.
2. Save the image in C:\Program Files\Movie Maker\Shared\AddOnTFX folder.
Create folder if not there already.
3. Copy paste the following code into notepad and save in the above
mentioned folder as "mask.xml"
<TransitionsAndEffects Version="1.0">
<Transitions>
<TransitionDLL guid="{DE75D012-7A65-11D2-8CEA-00A0C9441E20}">
<Transition name="My Mask" iconid="0">
<Param name="MaskName" value="C:\Program Files\Movie
Maker\Shared\AddOnTFX\mask.jpg" />
<Param name="BorderSoftness" value="20.0" />
</Transition>
</TransitionDLL>
</Transitions>
</TransitionsAndEffects>
4. Restart WMM and confirm that there is a new transition "My Mask" in the
Transitions area.
Now drag the same video twice on the timeline with the second one applied
the built in blur effect. Apply My Mask transition between the clips and in
Timeline view drag the second video over to the first one as much as
possible. Note: it wont overlap completely leaving some part of the video.
To make it align properly you may have to "clip" the second copy of the
video by dragging the left edge to right...
