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Opacity can only be changed with a Cutaway edit. Make sure Show Advanced Tools is ticked in the iMovie Preferences. Drag a clip from the browser over a clip in the project and select Cutaway from the menu of options. The added cutaway clip appears above the original clip. Double click the cutaway clip and you can change various settings, including the opacity, in the Inspector pane that appears.

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Q: Can you change the opacity of videos in iMovie 09?
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