How are you using the cross fade tool?
It only works on audio regions. It can be sued to create a fade on a single region or a crossfade between two adjoining regions.
You need to select the cross fade tool and place the cursor over the inside of a region (as near the edge as you need).
Now click and drag over the edge to the outside of the region (or over into the adjoining region if a crossfade is desired).
Hope that helps,