I'm having the exact same issue. When I select tween with opacity unchecked, it will not blend the adjacent frames at all, it only copies the earlier frame. If I have opacity turned on, it automatically sets opacity of both layers to the same %, not leaving the earlier frame at 100% so the frame above it with opacity creates the desired dissolve effect.
Now, sure I can go in and manually set the frame opacity to 100% for the frame earlier in the sequence - but if I have 50 frames to fix, the automated tool really is not doing what I need. SO we both are missing some simple setting probably, and by default, Photoshop Tween wants to make the tween frames ghostly transparent. This causes a flash effect as the animation lightens during the transition.