In order to use the MIDI > DISSOLVE PART function, you must select the Track data you wish to perform this function on... you do so by clicking (highlighting) the actual Track data (under the measure counter).

Once you have selected the Track data go to MIDI > DISSOLVE PART and setup the dialog box.

I'm pretty sure I did that and I was only able to "dissolve" by note names...channel option was grayed. If I don't select the track data then the option to "dissolve" isn't available at all. I was able to do everything else in the tutorial except this dissolve which unfortunately is what I need to do.

Can you post a screenshot or a better description of what you've done- if DISSOLVE PART is not greyed out, but "by Channel" is not offered as an option, make sure the track data actually includes more than one channel of data.

Will do, but the Cubase track seems to play the 3 montage parts properly so I assume data is channelized.

Problem solved. I didn't exactly emulate BM because I stopped the sequencer between part recording. Since my MIDI record mode was on "new part", every time I stopped/started recording a new part was created instead of merging into the existing part. After 4 passes I had 4+ layered parts but onscreen it looked and played like a single part w/multiple channels. When I selected the part to do the dissolve, only the top layer was selected and the ones layered under it weren't. Each layered part had a single channel so the "dissolve by channel" was grayed.

Aha... yes. There is a feature in Cubase that can keep data separated or it can merge it. This is useful when you want make several passes in rapid succession yet treat each separately. There is some difference in how the graphic looks when the layers are separated. Thanks for pointing that out, as it can cause confusion if the merge of data is not active.