I just tried the same with with an MDL7 file, exported directly from Blender. It imports into WED the same way, as a model, and when I de-select "concave" in the properties, I get the "do you want to convert this to block" dialogue, I click OK, and nothing happens.

I mean, shouldn't "concave" de-select after this, and instead of a model, shouldn't I now see the hundreds of blocks that make up the level? Am I totally misunderstanding the purpose of this?