Way back when I was first playing with iMovie to make videos for my students I had to go through a very complicated process to do special effects. Be Kind to Your Erasers was filmed as two layers: one for the the finger and one for the lips. I used a third-party plug-in to create a picture in picture FX and did my best to layer the lips on to the fingers. It was inaccurately placed at times if the finger moved too much and the coloring didn't blend well. But, the results worked for me. I was only trying to convince my students to be kind to their erasers.
I remember destroying a Barbie Doll for the hair, painting a finger themed school room background, and using a twist tie for glasses. I was having a blast, giggling and playing like a 10 year old while putting the story together. I think I spent only a day or two of my summer vacation working on this video, but learned enough about editing imovie, script writing, and organizing a video to start doing this with my students the following school year. This is my favorite way to learn technology; by playing.

Now that I've acquired an iPad, I'm finding that there are apps that can be used for awesome video FX that would make recreating this movie much easier.
Funny Movie Maker- layers video over images (the lips effect). example
Paper Camera- makes rotoscoped looking videos. example
Doink-makes animated movies a piece of cake (like Flash but easier interface). example
Brushes- makes video from every stroke and choice made in creating art. example
FaceJack- does what Blabberize does for making an image talk. example
Puppet Pals or Explain Everything-make animated videos w/audio example

What else can we add to this list? Please chime in!