Matt, with all due respect, did you even look through the manual or the online help files before asking these questions?
What you want to do is very basic to almost any NLE and the answers can be found quite easily.
For example, Vegas Movie Studio Training Videos, direct from Sony.
Now that I’m done with my “rant”, let’s see if I can help you.
Options – Prefs – Editing as this is the tab you need to make changes in.
New still image length (seconds):
Adjust this value as desired.
Automatically overlap multiple selected media when added
This determines whether events (both stills & video) will automatically overlap or not when dragged to the timeline.
Cut to overlap conversion – Amount (seconds):
This determines the length of the overlap (i.e. dissolve)
If you already have several events on the timeline as separate events with no fades, you’ll need a tool like Excalibur or Ultimate S to change the cuts to dissolves.
This is why you need to set your parameters before you start editing.
The online help file built into Vegas is really quite good at explaining things.
Depending on which version of Vegas Pro or Vegas Movie Studio you have, there should be some tutorials built into the program.
These are typically found under the Help menu.
Let me know if this helps or makes things worse ;-(