Yeah u can.
I tested it with an AVI file & it worked.
Personally i think powerpoint is a crappy program.
Try using Swish v1.1,Swish v2, combined with the power of Flax text animation program n u got a good multimedia production going.
Or if u want to be fancy use Flash MX.
Or you could try using a program for somethignthat its not meant for or what is new to that program. For example Flash was generally used for animations and creating buttons. Importing video into flash and playing video files is sort of a newish thing to do in flash... its what I did. Try that. I dont like powerpoint either, its good for slides for lectures and thats about it.
If your school has macs, use them. They are way better than PCS for media work. Keynote (part of the iWork package) has great inbuilt tools for making interative presentations with very cool and fluid animations and many many options - also it is all drag and dro - so no fighting with useless programs like powerpoint...