I've also had luck using the QGIS Generalizer plugin (enable experimental plugins), and then:
Vector > Geometry Tools > Polygons to lines
Then use the Generalizer plugin to smooth the lines and vertices
Plugins > Generalizer > Generalizer
Algorithm: "Chaiken's Algorithm"
Then turn the lines back into a polygons
Vector > Geometry Tools > Polygons to lines
This does a better job actually smoothing the lines and rounding the corners. It's a bit clunky to have to have to switch back and forth between lines and polys, but it works. I know that there's ways to do this via Grass as well, but I've found them difficult to setup.