Hi ad
Thanks at lot for that post! I've never (well, hardly ever,) done it that way, and yes, it does work without showing a "still"!
I think it's a bit clumsy though when a simple split to remove a section seems more logical and there are some reservations. The amount cut off the first clip with the blue "Out" tab must not be less than half the crossfade otherwise a still image of the end of the clip will still show to make up the extra time, and the amount cut off the second clip with the red "In" marker must also be more than half the crossfade for the same reason.
The other thing is...It means you can't crossfade two uncut clips without the still frames appearing.
If one wants "still-less" crossfades with movies (and slideshows with pans or zooms added to slides) one will have to shorten the clip ends using the In/Out markers........However there is another way to achieve the same effect.
Instead of splitting off the section from the clips on the sequence line, (You can use "Split" for a major unwanted bit, ) just drag their ends along to shorten them and then add the crossfade this will also remove the "still" image effect.(The proviso being that each clip is shortened by at least half the crossfade time.)
i.e. Dragging the RIGHT hand end of the LEFT hand clip to the LEFT
and Dragging the LEFT hand end of the RIGHT hand clip to the RIGHT
Thanks again....something else I've learned. 
Nat