When I get the clips to fade into each other, I have to do each clip on a higher level or else it does not work? EXAPMLE: FIRST CLIP is Video 1, SECOND CLIP is Video 2, THIRD CLIP is Video 3, etc, etc...

So If I have 50 clips, I need to make 50 levels? This does not seem right.

Line up all video on same line. Snapped against each other.

To add transitions between, go to effects menu, and choose one of many there, including disolve, which is what I think you are referring to in terms of fading into each other. Drag and drop in line between. Presto you have a transition.

Or apply the default transition (regular dissolve, unless you change the default) by doing Ctrl-D when the time-marker is on a cut. The default transition is 1 second long I believe, but you can change that too. Note that Ctrl-D applies a transition to the active video track (so make sure the correct track is activated, by clicking on the track name at the left of the timeline). If you have a lot of dissolves to apply, just do Page-Down (to jump to the next cut) then Ctrl-D, Pg-Dn, Ctrl-D, Pg-Dn, Ctrl-D, etc.... Ctrl-Shift-D applies a default fade to the active audio track.

If you're making a slide show, select your sources in the project window, then click on Automate to Sequence (which is a selection at the bottom of the project window). This will put the sources in the timeline with a transition between each. It's a quicker way of doing it. Note that still images will have the default duration (go in the preferences to change it, before you automate to sequence).