Hi, Geof -
The words at the top of the menu boxes aren't "grayed out", so to speak. Rather, they can't be selected because they are the titles of the menu box, denoted by the ":" following the text, and the font is set to appear differently - the developers just happened to have chosen a lighter gray for this. The items listed in the menu that can be selected are common styles/variations of fades.
With regard to your question on the crossfade:
Select the third track in the project
Click on the crossfade button
Select the menu item, "Custom..."
Identify your selected track in the crossfade UI (usually the top song)
Adjust the starting marker of the fade out to the point you want to start fading out at (the top-most blue box on the blue line)
Adjust the ending marker of the fade out to the point you want to end the fade out (e.g. 20 seconds before the end of the song)
To remove the now silent sections of the track, identify the black box on the red line that marks the start of the next track
Drag the red line to the time marker where you want the next track to begin
To eliminate a crossfade and begin the track normally, drag the start and end points of the next song's fade markings to the red line - this will remove the fade in