Aiming at the problems in video mosaic system that image transformation distortion caused by improper selection of stitching surface and fusion blur caused by image parallax, half angle correction method was proposed to help select proper stitching surface and small region fusion method was applied to solve fusion blur problem. First, image's attitude parameters were calculated by using relative orientation of photogrammetry; then, according to the attitude parameters, images to be stitched were rotated half angle and mapped to the same intermediary plane; next, the images were aligned by matching points; finally, a bar area was selected in the middle of overlapping area as a transition area and the fade fusion method was applied to the area. The experimental results show that, half angle correction method can achieve smaller distortion than the traditional plane stitching method; compared to fade fusion method, small region fusion method can avoid large area of blur problem caused by parallax. So, half angle correction and small region fusion methods can solve image transformation distortion and overlapping area fusion blur problems effectively.