Hi Mitch - I've done that in using current set up.  Still doesn't work.  The apply credits check box still isn't working under this sequence. See below.

I choose auto apply:

I fill in first amount of credit:

I fill in second amount for balance on second invoice and then hit Save:

And ..... Credit is not applied and same old payment window shows up:

I still can't get credit eliminated and paid invoices off statement or payment screen.