Yes, basically they can. The arms attach to the torso by a simple peg and hole design.
The shoulders just plug onto pegs sticking out from the torso. So yes, you can rotate the arms up and down.
However, on all of mine, I have glued all the parts together. Not really beacuse they are loose, although a few parts like the VA-3M Fighter's tail definitely need gluing, but as a preventive measure, because if my 4 year old gets hold of them, he will definitely scatter parts all over the house and no doubt lose some bits.
He's already claimed the VF-1J for himself, which is OK, as it's the one I'm the least interested in.
Graham