Dynamic Keyword Insertion is a feature which allows you to inform the ad network to substitute a parameter in your ad . This is normally the keyword with the search query of the user if your ad is shown. A WebmasterWorld thread inquired if dynamic keyword insertion techniques in display URL of ads also works? It seems that this feature is already there in Google AdWords.
However, the question might not be as important as it seems. So long as the destination URL works and the visitor is able to reach the landing page, it should not really matter whether the display URL works or not. This is not to say that they can be made to work (they very well can be) but how useful is that anyway?