This is my way of working with timelapse and others probably have better ideas...
I use still images from digital cam. Probably don't want to do this with large filesize images - eats lots of RAM and will hang the program even on strong systems.
After setting the 'New still image length' under Options>preferences>editing, and in the same box your 'Cut-to-overlap conversion' apply the changes and close the prefs. Now select all your images, making sure they are in the correct order in the Explorer tab window so that the first image is at the top, and hit Enter.
I normally just mess with the first setting (New still image..) to adjust total runtime. But adjusting the cut-to-overlap changes it too when centered on cut.
If you have trouble getting it to look good at the time limit you want (5 sec?) try making it look good first and render it. Then bring it back in as a clip and apply a velocity envelope.
I have also used stills captured from DVX to laptop as Jpegs through a program called Video Man 3.0 from Stoik software.
Good luck!!