Yep, I do it all the time. What you need to do is make sure ripple edit is off. Then make your overlap between your two clips for the duration of the transition you want. Remember that you probably want Hollywood FX transitions to be a bit longer than a normal crossfade because more is going on and you need to give the audience time to absorb it. Next, split your clips on either side of the transition (leave a few frames on each side) and drag them both up to the next higher track. Now move them both out to eliminate the overlap but make sure they meet in the middle of the hole you made in the lower track. This will make them longer than the hole that you just left in the lower track but this is what you want. Next create a loop region of just these two longer video clips and render them to an AVI file using the “Render loop region only” option.

You should now have an AVI file that you can bring into Studio and split and overlap again to match the duration of the original transition. Next, apply your Hollywood FX and render as an AVI file. Finally, go back to Movie Studio and delete the two clips from the upper video track and drag and drop the new AVI file from Studio into the hole you made in the lower video track. If everything went right, the new video with your HFX should be exactly the same size as the hole.

~jr