You have to overlap. The more you overlap, the longer the transition time. Drag one event or picture over the other. You'll see a X, that's the transition area.
If you try the other suggestions and have no luck, try pre-rendering the transition.
I find that if it's a large file that my computer is crunching on, the preview window gets all choppy. Pre-rendering cleans it up a lot and gives you a good representaion of what the final outcome will be.
Thanks for all your help. I had done the first two suggestions already with no luck. It turned out the final product came out fine, so it is most likely the third idea.