No snipe software I've heard of will block a bid. I'm not sure why you were putting in valid bids and they were not going through.
My experience with snipe software is that it will only act on a set time (user confgured) before the end of the auction - usually a few seconds. It wouldn't bid at any time before that so a user just bidding on the website would still see their bid there. The only way I know of to auto-increment your bid like you were seeing is using e-bay's max bid system where if someone has entered a max bid higher than your bid it will auto-incremement to a bid above yours. Yours should still register in the bid history though.
I've used Snipe! successfully in the past but missed out on a slipper clutch setting it too low - 4 seconds. I still got the slipper clutch by contacting the auction owner and getting another one he had. I won a full set of fairings with it set to 5 seconds (allows for the vagaries of network latency getting to the ebay servers). Another one I've tried and worked was actually a Snipe company on the web that gives you 5 free auctions when you join and then you pay a set amount after that (if you introduce people you get more free ones etc).
Snipe! cost me $10USD through paypal and it works ok, I think the online well-connected ones that host your snipe could have a slight advantage being connected closer to the internet backbone they could afford to come in a bit later - towards the end of the auction. I can't remember who I used now but if you're keen I could do a search and try and find out?
TP