May I make a couple suggestions:
1. Making a copy of your video file in windows explorer to place on 2 tracks is unecessary, you simply place the same file on 2 video tracks in vegas; in other words: 2 instances of the same file. The way you describe uses disc space unecessarily.
2. I remember seeing the technique you are trying, but I think you are missing a step:
<<< Import you video clip into vegas Video. Copy and paste the clip onto a second track making sure it is completely in sync with the above track.
On the top track click on the *compositing mode* button and select overlay.
Add a gaussian blur to the track below and set both ranges to 0.010.
now the colour and contrast maybe high. Add a black and white filter to the top track and desaturate it a little to suite your needs. >>>
Personally, I didn’t like the results of this method the time I tried it, but this may have just been the particular footage I was working with. I’ve been very pleased with the free Magic Bullet film looks plug ins that came with Vegas v5. I’ve used a combination of “black diffusion 5.0” preset/at about 30-50%, with “filmic warm”/at about 30-50%. Of course you’ll want to play around with those combinations to you liking.
Good luck,
JonC