Hi
One way of getting your crossfade to work as you want is as follows...
Put Clip1 on the sequence line followed by Clip2
Click the effects box at the end of Clip1 and add your crossfade for the duration required.
Now select Clip1. Move the red cursor line to the left end of the crossfade effects bar above the sequence line.
Grab the right hand end of Clip1 and drag it left to the red cursor line.
Now move the red cursor line to the right hand end of the crossfade effects bar. Grab the left end of Clip2 and drag it to the right up to the red cursor line.
In effect you are "folding back" lengths of each clip that will play and overlap as the crossfade takes place.
The amount "folded back" should be at least 1/2 the length of the crossfade duration. Using the red cursor line as a marker ensures that this is the case.
If you don't do this procedure VP will use a static frame from the end of Clip1 and the start of Clip2 as the background image.
There will be no overlap of the two clips. Obviously in this case the two clips retain their original length. Creating the overlap reduces the lengths of the combined clips by the crossfade duration.
You can also create an overlapping crossfade by placing Clip 2 on the overlay track above Clip1, dragging it back a little and then altering the opacity from 0 to 100% for the overlap duration. This works well but requires a bit of practice.
Nat