You can use the motion blur fx and key it; you even have the horizontal/vertical possibilities here... don't forget that when you right click right onto those keys (small squares), you can choose the way these keys are going to "react"...
You can also add some kind of "smoke/smog/fume" by dragging the appropriate generated media on a superior track in the timeline , bring the background to transparency, color the so-said "smoke", make it move in all directions, etc...so you'll get this "cloudy" effect on top of all that.
And you can key the colors of your characters, making these colors "wave" to get an even more surreal effect.
Also, what could be a great fx to use in that situation: Glow. Totally keyable too...
Josh, also try the lightrays with adjusting to just a taint of the effect. To me this looks
like the soft glow they used in the 60's and 70's for pretty girls like in the sound of music when they would show maria during a romantic part.
Not in front of Vegas at the mo' but I recall using a glow filter (?) to recreate exactly that effect on a video of our baby on the morning of her Christening (sorry, just had to slip that in...)
Try this: Create a duplicate of the videotrack you want to make dreamy. Apply gussian blur on either track and make the upper track semi transparent... should do the trick.
Thanks for the suggestions. They all come close to the real thing.
I was hoping to get similar effects like those generated by "Andromeda Scatter Light" for photoshop, but I'm quite happy with the ones built into VV.