I'm working in Final Cut Pro (version 6.0). I notice when I try to put a cross-fade or cross-dissolve transition between two .mov clips it doesn't let me do it. NOTE: it seems to do that with all the video transitions but the cross-fade and cross-dissolve are the two I use the most.
It works just fine if I try to do it between a .mov clip and a still shot (.jpg) or two .jpgs.
You need what is called handles on your video clips. If you have a 1 sec cross dissolve, you need 15 frames on each side of your video clips. Set an in point 15 frames in on your incoming clip and an outpoint 15 frames from the end on your outgoing clip.
Eisen Video Productions
Chicago Final Cut Pro Users Group