Beginner - Masking or feathering a Displace modifier?

New to blender, but a veteran of a number of other (much more expensive) 3D packages. Still figuring out the proper terminology and workflow…

I have a complex model. I have an image I want to apply as a displacement to part of it. So far no problem, I just assign the displacement to a vertex group and I’m off.

Now I want to feather the edges of the displacement, giving it a smooth transition into the non-displaced area. And I’m stumped. Is there a way to layer a mask onto the displacement material or apply a weight map to it or something? Or is there another way that I’m not thinking of?

(Note that applying the feathering to the image its self isn’t an option since it will be animated separately from the mask.)

Blender 2.65

Instead of selecting vertex and making a group, make a vertex group using weight paint.
That will assign a strength that you designate and paint with, to the vertex. This will translate
not only what vertex gets the displacement, but how much as well.

or you could use an image based displacement map, and blur the edges

Perfect! Thank you.

Have you succedded with the task?
I have similar intention, but cannot setup textured group weight.

Select your object, then see down at the bottom where you set your mode to ‘object’ or ‘edit’?
There is also ‘weight paint’ there too. Select that.