Well, at the suggestion of other forum members, I reproduced the effect using a morph instead of the complex fade setup. Actually looks better than I anticipated. See it here:
I first tried WinMorph, but that software sucked. I tried 2 others. Then I came across Morpheus Software at http://www.morpheussoftware.net/ and triend their "Industrial" version, as it accepted input directly from video.
Needless to say I was impressed and purchased it after using the demo version to make the test morph. It is really user friendly, easy and simple to use.
When this effect is used in my movie, there will be a real cat morphing into a woman dressed in a half-cat half-woman constume.