They can, yes.
I've had some eggs fertile when laid, show a network of veins for a while, then just stop developing. After that, they gradually go mouldy and collapse. From what I've seen, this can happen at any stage of incubation.
I've had it happen to odd eggs in the middle of otherwise successful clutches, so I don't think it's a problem with the incubation method.
I guess it just happens when something is badly wrong with the embryo. Nature slams the brakes on the process.