We recently released knowledge base article http://support.microsoft.com/kb/982954 addressing an issue with certain MPEG-2 files inserting into PowerPoint. There were a few workarounds we suggest. One of which is installing an MPEG-2 codec.
PowerPoint cannot insert a video from the selected file. Verify that the necessary codec for this media format is installed, and then try again.(400737)
However, there's actually a neat little trick you can do to get these MPEG-2 videos to insert, then play in PowerPoint 2010. Basically, you just need to downgrade the video to a 2007 video object. There's not a downgrade button or anything like that but you just need to insert the video into a legacy presentation (*.ppt) that will be in [Compatibility Mode], insert the video there. If you have an existing file that is already a native (*.pptx; *.pptm) presentation and you want to insert the video there, just copy and paste the video from the legacy presentation (*.ppt) then insert into your native presentation (*.pptx).
Steps to successfully insert the video into PowerPoint 2010.
1. Start a new session of PowerPoint 2010.
2. Click on the Save button on the Quick Access Toolbar in the upper left above the File tab.
3. Change the 'Save as type' drop-down box toPowerPoint 97-2003 Presentation (*.ppt).
This will put you in Compatibility Mode
4. Choose a location to save the file and click the Save button
5. Click on the Insert tab and click the Video icon.
6. Select the MPEG-2 video you received the error on before and click the Insert button.
7. Right-click on the video and choose Copy. You could also press CTRL+C; or under the Home tab, click on Copy on the left side of the Ribbon.
8. Open the presentation (*.pptx) file you received the error on earlier, then right-click inside the slide you want the video inserted, and under the Paste Options choose the icon on the left (Use Destination Theme). You could also press CTRL+V; or under the Home tab, click the Paste icon on the left side of the Ribbon.
9. See if you can now play the video.
10. If the video plays, right-click the video and click Upgrade Media Object.
11. In the Media Object Upgrade dialog box click on the Upgrade button.
PowerPoint 2007
http://support.microsoft.com/kb/2276463
http://support.microsoft.com/kb/2386377
http://support.microsoft.com/kb/2276482
http://support.microsoft.com/kb/2276471
http://support.microsoft.com/kb/2345310
PowerPoint 2010
http://support.microsoft.com/kb/2345341
http://support.microsoft.com/kb/2345342
See KB 953878 for more information on Office hotfixes sent out in the Cumulative Updates schedule (every two months). KB 953878 will have the master rollup articles for the current bi-monthly set of hotfixes.
If you have a PowerPoint file from a previous version and haven't upgraded the video object yet, you can still use the Play Across Slides under the Video Tools/Playback tab.
The term "upgraded the video object" in 2010 refers to either 1) File tab, then clicking 'Convert'; 2) Saving as PPTX; or 3) right-clicking on the media object and clicking 'Upgrade Media Object'
However, if you're working in a new PowerPoint file, or it has been fully converted, or a media object has been upgraded you need to change the setting in the Animations tab in Effect Options.
1. Launch PowerPoint and insert a video into the new presentation using the Insert tab, and select the Video icon, select the video and click Insert.
2. Select the video
3. Click on the Animations tab, in the Animation gallery change Pause button to Play button
4. Under the Animations tab, to the lower right of the Effect Options button click on the little arrow pointing down to the right (Show Additional Effect Options).
5. In the Play Video window, under the Effect tab in the Stop playing section, select After,
6. Change the number of slides to how ever many slides you want the selected video to play accross. In my example I changed the setting to 5 slides.
6. Click OK.
You'll obviously need more slides if you're using the exact steps from scratch in this example, where I created a blank presentation and inserted the video onto the only slide in it. So if you want to demo these steps exactly, please make sure to insert at lest give slides using the New Slide command under the Home tab.