As of commit 49806, feathered masks are available in the sequencer for color grading!!!
About (f-word) time! Is this (almost) better than sex or what? 
Seriously, though, we are now able to grade directly in the sequencer using feather masks which can be easily animated. Iāve just tested this and it is sooooooooo coooooooool!
Rough guide:
#1. load image/movie in the sequencer as usual
#2. use cool extra sequencer actions addon to open (a) image in the UV editor and (b) movie in the clip editor
#3. On either editor, switch to mask mode
#4. Ctrl+LMB click to create a spline (continue clicking until youāre done with an outline of the area of interest)
#5. Alt+C to make spline closed group (or click on checkbox āCyclicā on the Active Spline panel on the properties window)
#6. Also click on checkbox āFillā to fill the mask on the same pane as #5 (optional if itās on by default donāt remember)
Now this creates a mask which can be added on top of any strip in the sequencer. In the sequencer window hit Shift+A and select āMaskā. This will add a mask which can be multiplied over strips below but itās not feathered. The tricky part for me was to figure out how to activate the feather. Shift+F worked but created a feather inside the initial spline which did not work as a feather. The solution is to go to the Mask menu (on either editor) and select āSwitch Directionā. This reverses the order and the inner spline becomes the outer (i.e. feather) one so that when it is imported in the VSE it is actually feathered. (Btw Shift+LMB allows the moving of the feather nodes).
Thatās it! Now that you have added the mask to the sequencer above an image or movie strip set its mode to multiply and change its opacity so as to make the blend with the strip underneath smooth and the fall off imperceptible. Now activate color balance through the sequencer N-panel checkbox and grade as you like (actually this could have been the very first step, even before the masks but oh wellā¦). It will update in real-time! (Iāve tested an HD clip and didnāt seem to require proxies but this should be further investigated)
In case you need to animate the mask (obviously for movie strips only), you could use the movie clip editor to move the mask, adjust its general shape, and insert a keyframe by hitting I on the keyboard. Move a few frames forward and repeat. Shrinking, rotating, and moving all work with the standard shortcuts. Overall, animating works like a charm! Itās very fast, responsive and you also get real-time updates!!!
The 12th August 2012 will be remembered for the incredible world record set by the Jamaicans and the fully working VSE feathered masks! 
Final notes:
#1. in his commit Sergey writes that the mask should be used with adjustment layers. While it makes perfect sense to call the mask directly through the adjustment layer (i.e. without having to add each and every mask on the sequencer), I cannot get it to work using r49813 on my linux box. Maybe itās not implemented or fully functional yet. That would be some workflow as it would eliminate the need to insert dozens of masks and mask layers.
#2. while multiplication works without problems, mask-controlled saturation is not implemented yet.
A big thanx to devs and to anyone involved!
PS: in the unlikely case that people feel that a mini-tut would be helpful please say so and I will prepare one.
really would love that for simple effects work.
