Don't use *.bmp file, you get a better compression as a gif or jpg.
For your blending, it's done in about 5 minutes, better results takes a bit longer.
First you put in a clip into Layer1.
Into Layer2 you put another clip.
Now in layer2 you put the floating mask, make the mask like an oval.
Put the blend plugin onto layer2.
Choose 3D Titler as source an for this texture the clip in layer1.
Try it out, can as well be vis-versa.
best regards,
Daniel