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I agree. If you really care about search engine traffic, and especially Google, remove links to bad neighborhoods.
From what I understand of "nofollow", it does several things.
1. prevents bots from following links to information you don't want on the SE's.
2. preserves your PR on Google by preventing the bot from following the link (a little complicated, trust me =) ).
3. prevents bots from following links to internal pages to prevent duplicate content from being found, ie; a post on the front page of your blog being the same as the post's individual page.
Now I'm lumping the "nofollow" meta with the "rel="nofollow" in the anchor link, but the way I see it the work similar.
I'm sure someone else has a better explanation,
Don
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