I added the "Cross" effects strip to two text strips to create a fade-like transition. It worked but during the transition the background image becomes transparent.
The scene you have as the background clip is set to have a transparent background and in the sequencer preview you have enabled the alpha view.
You can turn off the scene background transparency in the render settings under Shading.
To not see the background transparency in the preview you can change to colour only display in the header.
Another option is to add another strip to use as the background, this can be a simple colour effect strip to have a solid colour behind everything.