Help: Playing 2 Animations at a time

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The problem with setanimtime() is that it will move directly to that position with no transition or tweening. You can only tween between sequences not individual frames. A workaround may be to extract each frame as an individual sequence (of one frame length) you could then use the Animate command with a sequence id to tween to an "individual" frame ( a sequence of one frame length).
This would not really be suitable for the purpose of blending 2 animation sequences.
To save memory and speed you could try copyentity to make various instances of the proxy and your proxy can be the skeleton with animation keys only without any mesh or texture. It could even be a skeleton of the upper body only in this case or even just an arm. As long as the joints in the proxy you want to blend have the same initial rotation values as the visible model.
I will create an export option in PaceMaker that exports just the skeleton or selected joints and their animation keys

The other alternative is to write your own animation/tweening engine which will then give you total control. Have a look at the Quaternion functions in the archives especially the Quatslerp function which makes tweening between animation frames easy.