Are you using software MPE or hardware MPE (GPU acceleration)?
(Also, you probably want to uncheck "Use Previews"... that uses rendered previews for output, instead of the original source. And check that Frame Blending is really what you want; that can cause some ugly smearing. These aren't relevant to your issue--probably--but I thought I'd mention it.)
I'm not sure. I am using my work computer. I believe a software GPU. Would this make a difference?
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Try placing a black video clip (right-click the project bin and select "black video") under both layers so it is the first (bottom-most) layer. Sometimes there is a problem with opacity/dissolves when there is not a fully opaque bottom layer. The problem does not seem to appear until the timeline is rendered.
I will try this today and see if it helps.
Do check that you do not have any "orphan" key frames in your opacity FX
Opacity key frames are automatically applied as soon as opacity parameters are "touched"
I also have experienced issue when applying opacity and dissolve transitions . I workaround that by doing the transition in Opacity using keyframes.
It is very easy to make a mistake with Opacity.
Jkosmicki, Thank you very much.
This worked perfectly. I will remember this in the future.