On to the bad news. From what I currently understand, it is impossible for .lwo models to be smoothed independently of the way they are triangulated. The effect is hard to notice when a detailed material is applied on top, but once replaced with a flat smooth one, it becomes easier to spot (though still not obvious): This is (most likely) caused by vertex normals being derived from face normals. In the image above, vertex V1 derives the direction of its normal by averaging the normals of faces
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