FCP won’t create a transition without enough media in the clips. If you try to transition from the absolute last frame of clip 1 to the absolute first frame of clip 2, FCP will say there’s not enough media. If you drag the end of clip 1 to the left a half-second and the start of clip 2 a half-second to the right, FCP will happily create a 1-sec transition.
I’ve never seen your example of stretching the transition and getting the resulting fade to & back from black. But it makes sense. FCP is doing the only thing it can with the media. It fades to black by the time clip 1 ends & fades up from the start of clip 2.
If you don’t have enough media at the end/start of a clip, try using a freeze of the last/first frame and transition with that media. Experiment with the duration of the transition to find the one that looks best.
Hope this makes sense & helps.