Ok, so i used a dremel to cut out some holes in my motherboard tray for cable management. I've scoured the interwebs for information on this...and ive come to 2 conclusions for dealing with sharp edges:
1) Sand/file down rough edges of the holes you cut to protect cables
2) Use rubber trim/grommet/molding to line the inner edge of the holes to protect the cables.
I do case mods and the channel molding you linked to is exactly what I use. In fact I bought it from those two vendors. The molding is flexible and it will stretch and fit. No problem. Use a small jeweler's screwdriver or thin putty knife to spread open the channel at one end to get it started. Then simply work the rest of it in slowly with your fingers. No need to use glue. The molding will stay put.
The 1/8th inch you mention is the "depth" of the interior space. In other words, starting at the edge of the metal, the molding would cover 1/8th inch of the metal. It's just telling you how much of the metal will be covered up. Also, if you click to enlarge the photos, you'll see that the molding looks like it's closed and you only see a slit on the end. They all come like that. That's why I mentioned using a small screwdriver or putty knife to spread it open to get things started.
Also, the molding at crazypc.com has the inside lined with adhesive to securely fix the trim to the sheet metal:
In fact, now that I think about it I even used that one for one of the case mods I did. That makes three different ones I've used and they all worked well. Some molding is rubber and some molding is flexible plastic. The rubber is flat black and the plastic has a shine to it.
Unfortunately I am growing old disgracefully and I forget stuff.
if you dont want to spend the extra money then Duct tape over the edges after they have been filed will protect your cables - admittedly not a neat solution
Another inexpensive alternative, assuming you have some velcro laying around, is the soft side of the velcro with the adhesive side wrapped around the sharp, but filed edges. This did the trick for me on one of my builds, and imo, looks a little better than duct tape.
I also use the channel molding from frozen CPU. I add a little gorilla glue to the edge of the hole in the MB tray first. It makes the molding slide a little better for minute adjustments and of course holds it in place once dry. I use a hole saw bit for my drill...drill two holes and then make the cuts between the two with the Dremel. Gives a nice oval shape with minimum Dremel work. File the edges down with a Dremel grinder or a needle file.. Paint, then slap on the molding and it looks great.