one vertex has two normals?
 

This is drivning me nuts! How can ONE vertex, yes it is only one I'm 100% sure, have TWO normals? Something fishy around here... Because of that I get a sharp edge when smoothing. Any idéas?

i don't think it has 2 normals.
you may have non-manifold faces or laminate faces,

u can go to the ply menu and do a clean up operation
or try merging vertices with a low threshold. like .002 or .001

I've already merged with 0.001, and the lines that are showing ARE the vertex normals, so as you see it has TWO?

nevermind, I deleted the faces and remade it. Very strange though.

Each vertex can have one normal per face that it is connected to. Normals determine how the shading at a particular vertex behaves. A vertex with one normal is smooth on all connected faces. When you start splitting the normals on the vertex, you get hard edges. Just look at the vertex normals on a cube and on a cylinder, and you will how that works.