Yes, these types of situations are pretty annoying to solve. Rhino users use a method where they build a pipe across the edge they want to fillet, then use that to trim the main object and remove the pieces which creates a gap for the fillet. You can then blend the upper and lower surfaces but that might not always work. You can also create a fillet profile and use the upper and lower edges as rails. But because these rails have sharp corners there might be spaces etc.

It's kind of frustrating, but that's Nurbs for you. :P

I've noticed that many Rhino users (that use it for precise modeling work) also have a copy of SolidWorks or Pro/E that they use for these kind of filleting jobs in the end of the process. Those are geared more for engineers and doing this kind of thing in a brute force method seems to be their forte, while they aren't intuitive for modeling.

So obviously not a problem specific to MoI, as even surface modellers that cost an arm and a leg like Alias StudioTools have the same problems (from what I was able to test with the PLE version).