Can't insert transition

The jpeg with no effect has a slug underneath it.

I take that to mean the jpeg-with-no-effect clip is on V2 right above a slug on V1. And the slug on V1 follows immediately after your kaleidoscope clip also on V1. Get rid of the slug and replace it with the jpeg-with-no-effect clip, on V1. Then make sure you have handles at the end of the kaleidoscope clip and at the beginning of your jpeg-with-no-effect clip. Then insert your transition.

I suspect you have the In Point of the jpeg-with-no-effect clip set at the very beginning of that clip. You'll have to move the In Point in at least 15 frames if you have a 1 sec transition you want to insert.

OK, I think I understand better what you're dealing with.

Do you want to cross-dissolve the two clips or do you want to fade the first one out to black and then have the plain jpeg appear?

I suspect you want to cross dissolve. You may have to put the first clip on V3 and move the plain jpeg to V4, overlapping them the length of the transition you want. Then instead of using a cross dissolve effect, use keyframes & the opacity controls to fade out the clip on V3 at the same time you fade in the clip on V4.