#1. can .mov files be used as motoin textures? i see the little green dots next to them…
#2. my friends and have taped amature videos replicating mortal kombat and other games. Is there a way i can use blender to add effects?
also i’d need to be able to see the video while working so tht i can place the effect correctly.
if this is not possible is there a (free) program that can do this? thanks. 
I’m not sure about #1, but I’m fairly sure that they can be.
About #2: What kind of effects are you looking to add? If it is a scenewide effect like glow, Blender will do that just fine. If you need automated pixel tracking to facilitating adding energy balls that you throw at each other, you might want to look at a different tool. If it’s a 3D model being added, then Blender is definitely the tool in which to create it! 
Blender can show you the effect while working in either the camera view or as an image portion of the sequence editor (in the normal user defaults, you can go up to the bar at the top that says SCR: and select SCR4: Sequence).
Matt
well this helps, but what other program can i use?(free)