Don't you just love this topic [insert your smiley of choice]? I know Garagecube has stated in the past that they haven't found a method for soft edge blending that they like. How about the method that Wings VIOSO uses? That seems a bit similar to the way MadMappers Spacial Scanner works. I don't believe it would be an easy task to make something like this but on the other hand somebody (maybe the people behind the spacial scanner technology) could have been working on this already hand have code available?
http://www.youtube.com/watch?v=zJ7mMd2Enxc