The document: http://msdn.microsoft.com/en-us/library/dd607349(v=vs.85).aspx
states that #include "foobar.fx" will look for that file in the same directory as the current effect file.
It doesn't work, but using an absolute path does, which is of course useless.
Google doesn't come up with anything. Anything I'm missing here?
That automatic handling only works for the offline shader compiler tool, as mentioned in the link you provided. If you're compiling using one of the APIs, you'll need to specify an include handler for the compiler to use whenever it encounters an include directive: ID3DInclude