Having character states change more smoothly

If the character's change of pose needs to occur when the timeline reaches a certain point, you could simply insert the character twice, once for each pose. 

• Give the first pose a Fade exit animation.
• Give the second pose a Fade entrance animation.
• Adjust the characters on the timeline so the animations overlap.

For transitions that happen based on a click, you can put the poses into different states, and add Fade animations while in edit-states mode. 

• You can't add Animations to the original object when editing states. However, you can add animations to other objects that are inserted/pasted into a state. So, for character transitions, you'll cut & paste the character within each state, and then add animations. Those animations will play during state changes. 

The attached file shows these methods. The fade-between-states method isn't quite as nice a transition. It flashes a bit leaving the Normal state. Using a custom state instead of Normal might help. I suggest you play around with that if you want to use that method.