So, I think I'm having a similar or related problem.
I've got a clip where I filmed an object being picked up and taken out of frame.
I placed the clip into the time line and the cut out the part where my hand comes into frame and picks up the object, resulting in a sequence where the object is there and then disappears. So far so good.
Here comes the problem : when I use the cross-fade transition between the 2 clip (to make the object fade away) the software uses frames with my hand in for the transition, frames that should be on the cutting room floor, I've deleted them, they are not in either of the clips.
I've tried both 'Generate Freeze Frames' and 'Move Clips To Overlap' and it seems to make no difference.
I know for the case of fading there is a work around, but that won't be the case for all kinds of transitions, so I want to understand ;
Why does this happen? Is there a way to stop it happening?
Why use parts of a clip I've cut out at all? This is the opposite of editing!