I’m using Blender for content creation. Exporting static meshes from Blender in FBX-format works perfectly fine for me since 2.71 and UE4.2 (use the scale: 100 setting, and make sure your origin matches the worlds origin in Blender. For more info, see this wiki page: https://wiki.unrealengine/Static_Mesh_from_Blender).
From what I heard there are still some issues with armatures to be solved, and FBX-import in Blender still needs some work. But Epic is now sponsoring the Blender Foundation, and they’re working together to improve the FBX-import/export, so things will only get better. See f.e. the upcoming Blender features wiki: ://wiki.blender.org/index.php/Dev:Doc/Projects.