Did you load your model in MED?
The squares seems to be separate parts.
You can load it in MED, choose vertex mode, select all, and merge.
Save the model and start the preview, there you already should see whether it is smooth jet or not.

http://www.puppenheim.org/
http://www.wuerfels-welt.de
Old Game Tutorial: http://www.puppenheim.org/MITutorial.zip
Free Game Editor: http://puppenheim.org/AlienalsWeihnachtsmann.zip
http://www.puppenheim.org/blender_starting_main_settings.txt