After the google pagerank update I was surprised to see one of my blogs I had originally created purely for links testing purposes actually outranked my time-spent well written personal business blog. The blog in question is hosted on wordpress.com with a subdomain and achieved a great PR4 - about 2 months old with 35 posts of original text but full of links. I was using it to feed some contextual links to my main project and it helped me in the serps as much as any other contextual linking, but with daily targeted accuracy.
The way I think I achieved this PR4 status was purely by my use of tags and categories on wordpress in my posts. I literally did probably 10 exterior links into the blog - tiny steps to get it noticed, but what I did do is tag with funny, common and crazy tags. This way it gets into the ‘tag’ lists on the homepage and other pages on wordpress.com - essentially the blog gets handfuls of easy, quick and contextual PR8, PR7 and so on links. Even the blog which in content terms is pretty shocking gets hits - through this system - all be it 10 a day - I never intended to get them, even 40% or so click through to the site I was contextually linking too - so its win win 
Its well worth setting one up and just casually posting - it’ll help your whole serp efforts - I guarentee (but keep it quiet!) In summary here’s the ups and downs I have experienced in the last two months of testing wordpress hosted blogs.
Positives to having a subdomain.wordpress.com:
- Free Hosting
- Quick Setup
- Trust (cos you have .wordpress.com after it)
- Tags can be used and abused
- Categories can also be used to the blogs benifit
- Theme widgets are very easy to use
Downsides to using wordpress hosted blogs:
- No control over files - you cant add google adsense or pay per post code
- In fact no code control whatsoever - limited control
- long domain name
- can take a while to think of a good subdomain that isn’t taken
Here’s some more awesome reading for you!!!
- 3 Great ways to avoid disaster - virus squashing
- 3p Adwords Clicks - Cheap advertising
- Pagerank Update - Count your losses - smile at your wins!!!