I was playing with Set Matte, as @Triem23 said it was very powerful. And it is. It's just a bit confusing to me.
I thought that embedding Composite shots was primarily for convenience. When you get a lot of things going on: you roll them up into a composite shot - maybe proxy it for editing speed - and then use that as a layer in another one and keep on building the Ultimate Super Shot.
I tried having Set Matte use another layer's Luminance as a mask after it had been converted into Black and White with Threshold, but it doesn't work. I don't show it in the video, but whatever value the Threshold % is set to makes no difference at all. But, simply making that layer into a Composite Shot (that's a single image with a single effect on it - the mask is optional and makes no difference with or without it) and tada! it works.
My question is: Why? Nothing has changed. The embedded layer is identical to the original.
I think I've fundamentally misunderstood how Composite shots interact with each other; so if someone could explain them more clearly: I'd appreciate it.