Undercutting fret tangs so they fit inside binding the right way to do it, and I agree that the Gibson idea of leaving a little plastic lump at the end of the frets, instead of undercutting them, is really lame. When they started that, it was pre-bent strings, and it's just one of many really dumb things that are done to recreate stupid ideas, just because they're old ideas.
I'm not a fan of doing things to guitars that are completely unnecessary anyway. The reason binding was put on guitars and mandolins in the first place was to try to seal up the end grain of body woods, because in the 1930's and 1940's instruments were subjected to some pretty severe climate changes. There was absolutely no such thing as air-conditioning, and very few homes or buildings had anything resembling central heat, and the humidity was just... whatever it was. So a guitar kept in the upper half of America could quite reasonably expect temperatures ranging from the 50's to 100 and a bit in summer - inside your house - and any guitar in the south could expect as least some 90+ percent humidity and a few really cold spells. But binding on a solidbody has always been cosmetic, and as glues and finishes made out of things more durable than cow hooves and ground-up insects came along, it became worthless on hollowbodies too. There's nothing that binding can do that superglue can't do better.
