When you find the clip you want to add the blur to in your Windows Movie Maker project you may want to place it into the Timeline or Storyboard first. Once you do that right click on the specific clip, and select Video Effects. Go ahead and select Blur from the top of the left hand video effect column. Once you have selected it hit the Add button in between the two columns, which will then bring Blur to the right-hand column that lists all the video effects that are on that specific clip.
Now, you can just press OK, and it will be added to the clip. If you want to remove Blur from the clip, you just go back to the Video Effects two column menu, select Blur from the right hand column, and hit the Remove button in the middle to bring it back to the left-hand column. This will remove it from the video clip that you altered.