With Video Edit Magic you can mask out a section of video. Here is how: put the same video file in both Video Track 1 and Video Track 2. Use the Pixelate effect on Track 2, and extend its length to the full time that you want the masking effect to last. Add the Picture-in-Picture transition to the Transition Track. Click the Make View Rectangle and Bounding Rectangle the Same Size checkbox, and drag the Bounding Rectangle to cover the screen area you want masked out. Click OK. Extend the length of the transition to match the Pixelate effect.

Now when you make the movie, the area marked by the rectangle will be blurred using the Pixelate effect while the rest of the screen remains clear.