PhotoStory 3 is released today and the great news is that it's free for verified Windows XP owners. Sean Alexander writes about some of the new features on his blog.
I think using PhotoStory and MovieMaker together is a great combination to turn your photos and video into a compelling movie. I'll have to write a little post soon on how I've done this in the past and host my final video somewhere for people to check out.
Just Added: Channel 9 has a video interview with some of the PhotoStory team.