Pixlab:
The bottom layer does have an alpha channel.
I made a simplified example. Here's the layer stack:

Here's a top layer set to normal so you can see the blurred edges with partial transparency:

And here's that same layer set to dodge. There's no longer any transparency in the object's boundary--it's just a solid shape.

If I try to erase along the edge with a soft brush set to any opacity under 50%, it does not erase. If I erase with a brush set over 50% but under 100%, it erases 100%. Similarly, layer masking does not work as usual.
Last time I updated from .24 to .28, some of my legacy plugins I love stopped working, so I'm sticking with this version for now.
Sallyanne. I have two layers, and it doesn't seem to matter whether I apply the layer mask before or after changing the top layer's blending mode--as soon as it's dodge, it loses transparency.
Thanks!