If I understand right what you did is you got a circle surrounding the player that renders in custom depth, and you then use that to mask out the part of the screen where you can see the level as usual, with the rest being black. Right?
Blurring in a material is doable, but usually requires quite a few offsets and operations and is unlikely to look perfect. If you really want to go that way look up some blurring material setups from UDK (same as UE4 in this regard). I would personally consider changing your approach though.
An alternative way would be to use a Spheremask. That one has a build in softness factor and also creates a circle. So map the position of that circle to the position of the player, and you should also get it to work. Your main challenge would be in how to map it to the post processing material.
Your options are:
-Giant plane covering the level, only becomes translucent where spheremask is located (this would not even use post process material)
-You make a material function and map this spheremask on all materials in your game. You will need to use a blueprint script to continuously pass on the position of the player to the Spheremask using a material collection in this case. This may be the best way to go. This too would not use the post process material.
-If the player is always in the center of the screen, it is easy also. You’d just need to spheremask the center of the screen and you’d be set. This method would still use the post process blendable material setup. Alternatively you could calculate the conversion of where the player is on the screen vs center of the camera and then move the spheremask accordingly. That would allow you to move the player away from the center of the screen.
Unfortunately I have no tutorial for this nor have I ever seen anyone do this, but it is fully doable. I’ve done something similar in the past.