Jeff,
I am certain that there are lots of technicians experienced in softening
hammers out there in the MMD world.  I am not one of them.

I just finished softening the hammers, my first attempt at this sort
of operation.  I have an upright player and the sound was quite harsh
and blaring.  I followed the instructions of Art Reblitz for needling
the hammers.  His instructions are clear and seem very precise.  As
long as I followed his advice, I did well.  I was fortunate in that
there was sufficient felt left on the hammers after having filed them
to lose the grooves.  One warning: when I tried to speed up the
operation and needled without progressively checking my work (by putting
the action back into the piano and playing the notes), I over-needled a
couple of notes in the high treble end.  Overall, I am happy with the
results.

I used a needling tool that holds up to three needles and they can
be adjusted for depth of penetration.  Just follow Art Reblitz's
instructions and make frequent tests to prevent over-needling.
It works well.

I have not tried chemical softening.

Good luck.

Larry Toto