Blend mixes the original guitar sound ('dry') with the pitch-shifted guitar sound ('wet'). The pitch-shift can be from moving the whammy arm, V-Capo or both. The balance between the two sounds affects the impact that BLEND has on the sound.
VJP has 14 bit MIDI OUT to control external MIDI devices. The MIDI OUT is completely independent of the pitch functions so it doesn't matter if you're using V-Capo, Hold or Blend... MIDI OUT always sends data that tells you the current arm position - even in BYPASS mode.