As the manual says about end_blendpose:
Blending by linear interpolation computes intermediate vertex positions rather than intermediate bones angles. Thus it produces the best results when the bones angles of source and target pose are not too different, like less than 90 degrees
So, blending by frames is done in the end by interpolation the positions of the vertices rather than rotating actually the bones. That is the reason why your image looks weird. --- Maybe Valve implemented a complex blending by interpolation the bone positions/angles via quaternions and recalculation of the vertices.
Nevertheless, you should add more frames inbetween - Gamestudio can't provide IK so it would always look strange, imho.
