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Another thing to keep in mind when dealing with radii this small, whether you try the wheel route or the edge of a platen...the thickness of your sanding belt will matter...
OTOH 1/8" burrs and Dremel bits are all about the same diameter, regardless of grit
I stopped by a local machine shop today and asked them to give me a quote on what it would be to make a 1/8 and 3/16 wheel building it like LARRYZ10's wheel. Hopefully it'll be reasonable to make. I like the idea of not having much work in hand sanding by using my smaller grit belts with the small wheels.
I'll let you guys know how much he quotes me for them.