After a few hours sleep, I remembered that CSS3 was supposed to support rounded borders! That’s the way this should be done! Amazing what sleep can do for your memory. I found an example of the technique at 24 Ways by Andy Budd, in his post: Rounded Corner Boxes the CSS3 Way. The official documentation from the W3C for CSS3 Backgrounds and Borders Module is also available.
I found several sites with demos of the CSS3 technique, but they seem a little old. Of course that may be because the W3C seems to take it’s sweet time with some proposals: Cascading Style Sheets Current Work. If you follow the link for the CSS Backgrounds and Borders module you will find it was stated in September 2001!
CSS3.Info seems to be the current resource on the status of CSS3 if you would like more information. I’m going to experiment with it tonight in my new template design, and you will see how it goes!