Currently the Composite transition is the most useful way of overlaying clips and also allows for standard wipe type transitions.

Now, I'm wondering if it doesn't make sense for clips to be automatically composited over other clips, using it's own alpha channel information, if there is one present for that clip? (I'm mainly thinking of title, image and image sequence clips here.)
This, without actually requiring the user to add a 'transition' to the clip.
Currently we may have to add this transition (not always, but in many cases), then set its values appropriately and finally stretch it to span the whole clip.

I suppose there might be technical reasons behind this current behaviour. But if it is feasible, I think it'd be a boost in productivity to have a Clip Properties section somewhere, where we could control some simple settings like alpha channel interpretation (i.e. use it, ignore it, if it's premultiplied/straight, invert it), clip opacity, and perhaps in the future even set a transfer mode there (like Krita or GIMP layers).
This would have the added benefit of visually simplifying the timeline interface (i.e. there would be no transitions between every overlaid clip as it does currently).

I'll try to upload a screenshot showing how Premiere Pro handles this, for reference.

Thanks for listening!

Here's the screenshot:
http://www.internet.com.uy/ggabriel/kdenlive/Premiere.jpg

Now I see Alpha Channel interpretation is done at the Project Tree level, as a property of the source clip, and not as a property of the clip in the timeline.

Hope it helps.

The alpha channel should definitely be used without the need to add a composite transition.
However I think the blend mode is what transitions are for.

Adding default alpha channel support to clips would be great, and no doubt it is a far more usual thing to use in a standard editing session than using blend modes. So of course I'd be delighted to see this happening in kdenlive anyday soon. :)