Thanks heaps for that. I solved the problem. It was 'marked sharp' even though I don't remember ever assigning it as sharp. Even when I would delete that whole section and rebuild it from scratch it would still appear sharp. All good now.
is it marked sharp? rightclick on the edge loop and clear sharp. is this uv'd? it may be a texture seam. does the smoothing change if you scale out that loop at all?
Yeah, it will transfer. General idea is to make whole model smooth, Auto Smooth on 180 and then assign sharp edges as needed. You could also give 'Weighted Normal' modifier with Keep Sharp on a try.