Yes! you must use a movie file, or image sequence which has video qualities inside After Effects, that allow it to use Frame Blending option.
Thanks for highlighting this again :)
Cool trick, thanks.
Just to let everyone know: this only seems to work for (Photoshop?) image sequences. So, if you have a comp with consecutive single frames and you nest it and do the time remapping trick, frame blending still won't work. This, at least, is the behavior I encountered in CS3.