A different technique for achieving blurred shadows would be to use 
radiosity.  Its quite hard to make a point light produce fuzzy shadows. 
  On the other hand, its quite hard for radiosity to produce razor sharp 
shadows.  Try lighting your scene with pure radiosity with an ambient 
box replacing the area light.  If you keep the error bound high, say 1 
or so, the shadowed areas should be more than blurred.  This method will 
require much more tweaking than conventional lighting but I think you 
can definitely achieve what you are after.

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