I will assume you are using a single sided transition on the end of the clip in the upper track? Most of the transitions work that way. I have come across some that acted odd, but I never investigated and just found another way.
I suggest attempting to use the transition between two clips on the same track first. On the other hand, are you sure that your video has an alpha channel to work on? Most video doesn’t.
Steven
http://www.stevengotz.com