Is it possible to use the past continuous with before? For example: We were watching television before you arrived last night. Or is simple past the only option?
Certainly. As with many choices of aspect in English, either is possible, and differs only in how the speaker wishes to refer to the events. The choice of watched implies that, for the purpose of the current discourse, the speaker is regarding the watching as a completed act. Were watching suggests that the speaker has the watching in mind as a continuing process - perhaps they are then going on to talk about something that happened while we were watching.