Ok, so I found a painstaking but working solution. It turns out that tweaking the .mdl file was all I needed for perfect exterior shadows. I used developer app called RADItor which allows you to adjust the shadow parameters within .mdl file. It turns out that adjusting the radius parameter to 15 (max) eliminates the issue completely for me. Unfortunately I had adjust each .mdl for each airplane...bleh. But on the bright side it works! Shadows look great now.
The two following links helped solve my problem
http://www.sim-outhouse.com/sohforums/showthread.php?70828-FSX-self-shadow-problem
http://www.fsdeveloper.com/wiki/index.php?title=RADItor