yeah of course its possible. And you can use animations or particles, up to you. Particles might be better for somethign like smoke though, and will also keep your image amount down. You can set the particle image, give it a random size, velocity, rotation, ect.
I use Apple's Motion and output them as a series of images. I set the frame rate of the project to 10FPS and make the animation 1 or 2 seconds which gives me 10 or 20 frames. Look at this video and you can see them in one of my games.
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Guru Video Channel | Lost Oasis Games | FRYING BACON STUDIOS
Nice sparkle ! : )
Can I steal the sparkle image from your particle template for something I am working on . . . . . ?