Since I am withdrawing from the contest, I've decided to go ahead and post some "secret" ideas I was working on that might help others improve their entries. The first cool thing I discovered is that you can use LUA scripts to integrate video cut scenes into your game even before the story mode has video play capability.
This is simply accomplished by using the built-in os.execute command and telling it to run windows media player with a file in fullscreen mode. I'm doing this from memory so if there is a typo then I'll try to help you resolve it when I have a chance to check my code on my home computer.
os.execute("start wmplayer /Task NowPlaying /fullscreen video.avi");
Older version of wmplayer allowed additional parameters to close the player when it completed the video, but they since removed this. So, once you are done playing the video, you can kill it by executing the following code:
os.execute("taskkill /IM wmplayer.exe");
The problem is knowing when to kill it. You can use a timer and specify the length of the video, but there is some delay before the video plays. You can probably experiment with this and find a good buffer time for your timer.
Anyway, hope this helps others who might want this feature.
System Specs: OS - Windows 7 Home Premium 64-bit SP1, CPU - AMD Phenom II X4 945, 3.0Ghz, RAM - 8Gb DDR3, GFX Card - 2048MB NVIDIA GeForce GT 640, FPSC-R Version - Beta 1.006