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I dont see any way on a API/hardware level that you can have a feature like this. Vertices are either welded in a mesh or not, and I dont believe any modern 3D engine has this kind of feature. With vertex and pixel shaders there is no way to get information from other vertices or to turn off interpolation..



in my opinion the mdl7 format should contain some kind of smoothing information and when the engine loads it it generates the direct3d mesh with taking the smoothing information into account (it splits vertices where necessary). for calculating stencil shadows (and i think other things like some collision detection algorithms work better with closed continuous meshes too) the closed mesh data like in the mdl7 file has to be used.

i don't know the details of how other engines do this but for example with ogre3d it's no problem to have hard edges in models and use stencil shadows with them.

and having split vertices in a model format which isn't only meant for being loaded by an engine but also for editing in a model editor is a kind of ugly solution.