Mustard consistency is used for laying into the joints because it will penetrate into/fill the joint and create a strong glued part.   it can run if over-applied, but your really just filling in the joint and the sides of the joint should prevent it from running.   to the extent that the joint is open, you should tape the outside (the other side of the side you are applying the glue to) to prevent the mustard consistency glue from spilling through the joint.   i tape with a high quality packing tape tighly applied over the outside of the joint and have never had a problem with mustard consistency leaking through the tape.

the fillet is to create a rounded surface and reinforce a joint so that it can take a layer of glass.  since it's a lot more material being applied, if it was not peanut butter consistency, you would not be able to shape it/have it hold its shape.

anyway, i hope that explanation helps....it's a standard, time-proven approach.

   Thanks for the info. Why silica and not wood flour? Can I use wood flour instead?

the different additives (silica, wood flour, microballoons, etc), when combined/mixed into the epoxy create a product with different properties that can are then used in ways optimized for what you are trying to accomplish.

silica is typically used for glueing, wood flour is a general thickener that is both strong and great for fillets, and microballoons, for filling gaps and smoothing surfaces becuase it is very easy to sand. 

you could substitute wood flour for silica....you just wouldn't get the same properties (strength, flexibility, sandability, etc) and while it may not cause a failure of a part, it would not be optimized or best for what you are trying to accomplish.

there are a lot of online guides that can get you into the weeds on this topic....but above is a high level summary.

h

FWIW, I used only epoxy/woodflour as glue on all my S&G boats and  they are all still in existence (the oldest turns 20 this month). The reasons that I avoid silica are because of the color mismatch, the fact that it turns rock hard and because it's a real pain to work with in terms of drifting through the air. It can be a silicosis risk if inhaled. 

I have not personally encountered a situation where silica was a better thickener for glue and think that it may be a historical thing derived from the fiberglass boat industry. There it makes sense. The boat is epoxy and glass fibers, so silica is a nicely compatible glue thickener. It has a similar coefficient of thermal expansion, sanding qualities, etc. For wooden boats a wooden thickener is more compatible. Or so my theory goes.

One last word about microballoons - Howard is right about their sanding qualities and suitability for fairing and smoothing, but I'd like to add that they should never ever be used in a structural glue. Because of their size and the hollow space in the middle, they have terrible shear strength compared to silica and/or woodflour thickeners. That's not a problem when fairing, but will result in much weaker glue joints which could fail disastrously.

Laszlo

   Thanks for the replies everyone, informative and helpful replies. Cheers. 

John Harris once wrote to me that he considers wood flour entirely interchangeable with silica powder. (I had run short of the silica on my dory.) I agree with Laszlo about the color mismatch. Wood flour all the way!