Summary: iTunes is a great source for music to listen to, but there are technical and perhaps legal hurdles to use it for anything else.
I use iTunes to download music from the iTunes store. I use Windows movie maker to edit my vacation videos. I wish to add music I purchased from iTunes store to my video but I cannot import it because it doesn't recognize mp4 files. What do I need to do to make this work?
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There are approaches and I'll cover what they are, but there's another problem with this scenario.
Believe it or not, this might not be legal.
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I'm no lawyer, so I'll only mention this as a potential risk: depending on what you plan to do with those videos what you're doing might be a violation of copyright law. If you're turning around and sharing those videos with friends then you are, in effect, making copies of the music that you purchased. That's most likely against the terms under which you purchased it.
I'm not saying "good" or "bad", and I'm not even saying it's right or wrong. I'm just saying it is, and you need to be careful and aware of what you're doing.
All that being said, there are two approaches to doing what you want, one of which is almost certainly in violation of the law no matter what you do with the results.
Convert to MP3 by Burning & Ripping
This involves a little loss of sound quality, but since iTunes allows you to burn your playlist to an audio CD, then you can do the following:
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Create a playlist in iTunes that contains the song you want to use and any other music, up to about an hour's worth.
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Use iTunes to burn that play list to an audio CD. This is the kind of CD that will play in any CD player.
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Now, turn around and use CD ripping software such as CDex to extract the audio off of the CD you just created in mp3 format.
The result is that your music is now available in mp3 format, which your movie editing software should recognize.
Circumvent the DRM
"DRM" is the Digital Rights Management that is used to lock access to the songs in anything other than the approved player and by the owner who has the legal right to.
Unfortunately circumventing the DRM is most likely illegal.
There are several tools listed here that can be used to un-protect protected iTunes music. As is typical with such tools, they're often somewhat obscure, prone to breaking as new versions of iTunes come out and certainly less than polished.
I'll leave it to you to determine which path you would prefer to take.
The bottom line, though, is that after conversion to mp3 you should - technically - be able to do whatever you want to do with the music you purchased.
Which many feel is the way it should be without having to jump through all those hoops.
Article C3182 - October 15, 2007
