Students have been experimenting with many different Web tools, including XtraNormal.com and GoAnimate.com - both of which allow you to create "videos" by choosing from the backgrounds and characters they provide. You type the text you want the characters to speak.
There are limitations on what you can do with the free tool. At Go Animate, length is severely limited so student has to make 3 separate videos. I discovered that I could combine them into one movie using the free Debut Video Capture which I downloaded and installed. Then I could capture each of the student's videos while they were playing and use Windows Movie Maker to combine them into one movie, which I then uploaded to YouTube.