Hi,

Thanks for the link, I will try the 2.0 beta.

I guess this is a bit off-topic, but I contacted Autodesk about my problem and they do have a converter utility that takes an OBJ input and converts it to FBX. This may be helpful for other people here stuck with OBJ output so I'm posting the links here:

Windows: http://images.autodesk.com/adsk/files/fbx20102_converter_win.exe
Mac: http://images.autodesk.com/adsk/files/fbx20102_converter_mac_enu.pkg.tgz
Linux: http://images.autodesk.com/adsk/files/fbx20102_converter_linux_enu

The reason I'm lingering with OBJ instead of FBX is I have a number of applications in my pipeline that can only output OBJ, and also a lot of my clients use OBJ as it's some form of standard today.
Unfortunately, Autodesk's converter seems to strip Smoothing Groups, but at least it's something. I read that MAX 2010 has better OBJ import module, maybe it's time for an upgrade...

Anyway, back to topic, thanks for your response Michael, at least now my problems regarding MoI have been resolved. :)