First of all, media can't be embedded in a PPT 2003 file -- it's actually linked, even though it plays on the slide.
AVIs using the Indeo codecs are usually a good bet. WMV is an even better bet, if you can find a converter that does MTS to WMV. I don't know if Plays for Certain will convert MTS or not, but it's where I'd start. There's a free, fully working trial download at
http://www.playsforcertain.com