No bug, that's the way MeshCAM and similar programs work. Typically, for a really good finish, people use 5-8% stepover, which would be .006-.01" with your 1/8" endmill.
A new beta version of MeshCAM 4 was just released, and let's you select regions to machine. This should allow you to machine flat areas with an endmill, and other areas with the ball mill. However, it may not be as simple as you'd like. I only played with it for a minute.