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For years I have been reading absurd suggestions that Google’s Blogger / Blogspot service is SEO friendly. At one time this was semi-true, and it is even possible with the current incarnation. However if you use the service “as intended”, without expert knowledge, you might find yourself up a creek without a paddle.
I am writing this on a Sunday, thus I am going to avoid vulgarities, cussing, and even an attention grabbing headline. The Google engineers at Blogger deserve that and more. Blogspot currently stinks for SEO.

Blogspot Doesn't Categories
There was a historical lacking feature in Blogspot, no categories, and users wanted them.
So Blogger introduced labels, but they unfortunately followed the advice from their own Webmaster Guidelines, such as this example from Blogger’s own Blogger Buzz blog.

User-agent: Mediapartners-Google
Disallow: 

User-agent: *
Disallow: /search

Sitemap: http://buzz.blogger.com/feeds/posts/default?orderby=updated

That causes label pages such as this one on the Google Webmaster blog not to be crawled
http://googlewebmastercentral.blogspot.com/search/label/webmaster%20tools
The links to those tag pages don’t have nofollow, but Google can’t crawl them to read what is on the page, but pages blocked using robots.txt still accumulate PageRank.

That creates “hanging or dangling pages ” and the PageRank gets shared out between all the pages in the internet
There are easy solutions to this:-

Best solution

Have excerpts on the label pages
Possibly noindex the label pages with either meta noindex or robots.txt noindex
Add nofollow to all external links on the label pages, both in the content and sidebar

Stop-gap solution

Nofollow label links from content – they still wouldn’t give any deep indexing benefit, but at least they wouldn’t throw PageRank away.

Note: Those solutions are for blogger developers to implement instead of using robots.txt disallow, not for Blogger users. Sorry Blogger users, you have been at a significant disadvantage for years unless you can find a smart (viable) alternative to creating categories by hand.

Blogspot Indexing Problems

With labels being blocked by robots.txt, some but not all Blogspot blogs have major indexing problems.
As an example, it doesn’t seem like Google passes any juice through the dropdown menus used on the Webmaster Central blog.

Fortunately for Rick he doesn’t allow his labels and pagination links to be the only method for Google to crawl his content, plus he has a huge amount of “Google Juice” to play with.
This is actually the best navigation implementation I have seen on any Blogspot blog, as it has allowed all his content to be indexed, or certainly the vast majority.

This is still “ball linking” rather than a structured appraoch, but for Blogspot it is about all you could hope to achieve.
By having this massive navigation on every page, effectively turning every page into a sitemap, there are so many link on page that a few external or internal label links don’t really matter.
This isn’t the case with the majority of Blogger blogs, and blocking with robots.txt is an abomination.
At the same time Rick has been trying to persuade people to stop using the old, unreliable Blogspot system which allowed you to publish to your own domain, suggesting that there are no problems .

How Hard Is It To Leave Blogger?

Whilst people talk about it being easy to leave Blogger to another platform, the importer has been bugged for a long time – Blogger strips stopwords from generated URLs, WordPress doesn’t.
Then there is only what I would term a “Interstitial Defamation Wall”

I had already left Blogspot before Google decided to finally provide custom domain support. I had set up a complicated script with meta redirects, and I even regained my rankings and wrote about it.
When custom domains became available, I decided that it would be best to assign andybeard.eu to my blogspot account, and then point it at WordPress so that visitors and search spiders saw an immediate 301 redirect.
Google when you set this up are very reassuring

It seems this is only true if you stay with Blogger forever. I should also point out that during my testing I discovered that I could no longer assign andybeard.eu, and I was forced to use www.andybeard.eu

Links & Rankings

The main thing that ties any Blogger to using Blogspot are incoming links and rankings. When I moved I probably had 24,000 links to my old Blogspot, depending on which reporting you believed.
Even a couple of weeks ago Yahoo was reporting ~10K , though it seemed a lot less today. Google in Webmaster tools only reports 100 or so, though they may have removed loads due to the redirects.
I don’t care that much, building up links takes time but isn’t something that can’t be fairly easily replaced over time, at least for me.
However for any potential blogging service provider (and honestly anyone running WordPress might soon be able to offer blog hosting within 3-6 months if WordPress core merges with WPMU) this is a serious barrier to overcome.
If you use Blogspot, but with a custom domain from the beginning, this isn’t a problem, but for everyone else, it might be a deciding factor to stay.
I could switch back to the delayed meta refresh method, but I can’t see why I should have to – Google should never have inserted such a message between me and my visitors.
I am looking to clean up some old articles because there is too much SEO junk on the web , but deciding how to handle my old “How to move from Blogspot to WordPress” articles are a major problem.

I am adamant that people really should still leave Blogger for their own good, if they value their online business
I am not in a position to advise on best practice, and the most suitable method is messed up.

As far as I am concerned this interstitial isn’t passing any juice through to Andybeard.eu, though there is a YES/No link, but it uses onclick, but returns false, but the URL is not constructed… ask Sebastian if you want a definitive answer .