merge & fade two videos

[ss2]

With VirtualDub2 I've been trying to import two clips and set the following settings with FrameTweaker and FadeFX but not having luck making it like this example.

In the example its two separate clips merged into one.

1. Fades from black (0 - 50 frames)
2. From the example video at 0:28 it looks like video 1 is fading out and some how video 2 is already behind it as it fades out and appears smoothly (I tried and it just appears as the next video no smooth)
3. Fades out to black last 50 frames

I don't know how to achieve what you want using VirtualDub2's filters, but it's easily done with an AviSynth script (a text file saved with the .avs extension) that you can open in VirtualDub2 (File→Open video file...):

vid1=AviSource("vid1.avi")
vid2=AviSource("vid2.avi")

Dissolve(
\vid1.FadeIn0(50),
\vid2.FadeOut0(50),
\24)#change the length of the fade if necessary

You could use FFmpegSource2("vid.mkv", atrack=-1), etc, instead of AviSource() to load the videos.

Alternatively, just use an NLE, such as Kdenlive (free).