Hi Simon,
This is normally exactly what HDR processing is for. While perhaps a bit limited compared to say HDR Efex Pro and PhotoMatix (full blown HDR processors), Photoshop's own blending can still be used to good effect. You find Photoshop's HDR mode under File|Automate|Merge to HDR Pro…
After blending your images into a 32-bit image, should tonemap it to a 16 or 8-bit image. There are various methods/settings for this, ranging from natural/realistic to arty/unrealistic. Pick the one you like best and adjust (if necessary). As you mentioned, however, you can't seem to get a realistic looking result from either software. Perhaps I can have a go (if you could e-mail me the raw files, that would be best).
If you want to do it with masking, I'd try to make use of the blend if sliders (right click the layer in the layers panel and choose Blending Options…) to have Photoshop automask the brightest spots of the “bright” version of the image, revealing the darker version. Of course manual masking/feathering would also work (but is likely much harder to achieve).
Hope this helps,
Hayo