I think that the unquantized frames would only be an issue with a cut between 2 video events as the unquantized frame tends to render as a single black frame (as I discovered about a decade ago) but shouldn't make any difference with video dissolves (crossfades) or audio.

What I still don't understand is why the track with the stills is still muted when the OP said early on about an uploaded still image of the timeline:

... it happened to be muted when I took the screen shot - the problem persists when unmuted

With that in mind, it seems odd that in the uploaded .veg file the track with the stills remains muted: