I've had cause to investigate this a little myself recently. I seem to get a lot of requests these days for "cheap" built in wardrobes and the like, which usually means painted 18mm MDF (I won't go near chipboard unless specifically requested by the client).
I haven't tried the watered-down filler method (but I might now) but I have had pretty good results using PVA diluted 1:1 with water and then sanded to about 180grit before painting. Trouble is I found it much more time consuming than my usual method because of the extra operation & drying time that has to be endured before painting can begin.
Thus I have returned to my original method which I have found to be the most cost-effective:
1. Buy good quality MDF with a nice flat, almost shiny surface. This will almost always mean a nice dense core and consequently a better edge to begin with.
2. Avoid using the "natural" edges of the board where it will show, if possible always use edges created by cuts for any exposed parts such as cabinet and door front edges.
3. Sand edges to be painted to 180grit and lightly "ease" all corners, then thoroughly brush and vacuum all surfaces to be painted.
4. Apply 2 coats of a good quality acrylic primer/undercoat, sanding the edges between coats, and all surfaces prior to topcoating.
I prefer to use a 4" roller for the primer/uc wherever possible, the ones specified for emulsion on smooth surfaces, and with the largest diameter I can get.
The advantage of this is that the edge sealing and priming of the components happen concurrently. Most people who want painted MDF furniture do so because budget is a primary concern, and it therefore becomes very difficult to price-in any extra operations/drying time.
I love my work, but I'm not in a position to give it away for free.