Hi kallas08,

.lwo with Ngons is the way to go when exporting mesh for Modo.

However, editing the mesh at a geometry level is really something to avoid at all cost ... same thing for the vertex normal, do not discard it.
If you need to add 'cosmetic' fillets, you might try to use the 'rounded edge' option in the material editor.

If you really need to edit the geometry, then indeed vertex normal should be deleted, but as you already discovered, you will get smoothing glitches all over the place that will takes you hours to fix.
However transformation at the Item level is allowed, but that's the only editing operation you can do.

I suppose there is quite a few fix in the meshing engine between V2 and V3.

As for the memory management, this thread might help :

http://moi3d.com/forum/messages.php?webtag=MOI&msg=5322.1