Thank you for the clarification. Next question, if I download a pre-made lower third animation, how do I use it in my project? For example, when I put it on the timeline, it covers the entire video frame with gray, except for the animation itself. I can see the lower third animation, but my video is covered. In the description, it says "includes an alpha channel for transparency information" I never worked with an alpha channel before, so I'm not sure how to make it transparent.

You can set the alpha properties in the properties, like Apple Jax mentioned.
On the timeline click the event->right click->Properties->Media tab->Alpha Channel.

Select 'Editing properties for a video file' then scroll down to 'Alpha channel'
http://www.sonycreativesoftware.com/webhelp/vegaspro/13/ENU/index.htm#ChangeViewFileProp.htm#kanchor182


VMP

"should the graphic extend all the way out to the edges of the frame, or should it fall within the motion safe area (if I want it to extend out to the edges when viewing)?"

Just consider for a moment ... what would the purpose be of *NOT* going all the way to the edges? Why would you do this?

Actually there is no correct way to have lower thirds limited, either frame or edges, or whatever.

Lower thirds that extend across the edges can be simple and useful, but the design lies in the eye of the beholder. Good graphic design elements that are dynamic within the safe view area are the overall winner. But in order to do that, you really need more complex design within the lower third itself, for example wave or slant edging rather than mere stripe or rectangle shapes which are safe in edges.

Yes, it's very common to see lower thirds that don't go all the way out to the edges, many also have a lot of transparency. Thanks, I will give your instructions a try and see what happens!