Based on a quick google search, yes.
Starting Score: ~500 (12/01/2008)
Thank you, namvet, for the quick response! 
When you say it will take longer to get the contract approved, what exactly do you mean? (Bear with me, I'm a first time home buyer!) Do you mean once I make an offer, it will take a long time to hear back?
I purchased a short sale property in CA in January of 2011 with VA financing. The fact that it was a short sale made no difference as far as the VA guarantee went.
As far as it taking longer that is just an unfortunate part of the short sale process. In my case I submitted an initial offer to the bank who had the distressed loan on the property in June 2010. I did not get any notification of approval of the offer until October. And this was on a property that the bank had already approved for short sale and listed with a real estate agent. The homeowner signed acceptance of my offer in June at the same time the listing went active. So about 4 months to get approval to BEGIN the actual loan process.
Note that I was already preapproved for the loan and needed to submit that with my offer in June. I had to keep going back to my bank (USAA) for extensions on the preapproval until the lien holder OK came through. My initial closing date was to be November 15th. I finally closed at the end of January 2011. The process was aggravating but I'm happy to finally be a homeowner in CA. Never thought I would see the day.
The other hurdle you may face is in the home inspection. Under most short sale contracts the bank is going to sell as is. If the property has deficiencies on the inspection then VA will not guarantee. Good Luck in your home hunting.