Hi
I presume you are using VP version 2.22. I use the free V2.12 myself but downloaded the trial version of 2.22 to to have a look at it in response to a similar question which cropped up some time back regarding overlaying titles with fades.
It seems that the overlay feature in V2.22, whether you are using an image or adding a title, cannot be set to fade in or out. You can alter the opacity of the overlay/title image but cannot create a change in opacity dynamically, however you can zoom and crop both title and image.
In the 2.12 free version there is no overlay feature although you can add titles that fade.
You may be able to get around this ...... possibly.... (can't be certain now as my 2.22 is past its trial period)
Put your overlay image on the sequence line. Adjust its play length to what you want and then set it to fade in at the start and out at the end. You can set the fade duraion times.
Save this as a new clip to the media list.
Pull it back down to the overlay line and position it where you want it to appear. I'm not sure, without the trial version in front of me whether you can do this with a clip but I think you can.
See what this looks like when played.
Nat