Google loves the blogspot domain (ie. blogger), they own it - why not?
I'm also of the belief MSN is primarily focused on indexing community sites, with a strong focus on blogs, friend networking, etc (as it's a great way to gather a ton of links quickly).
My recommendation: Go with blogger (or another reputable blogging company) and keep it hosted on their site. If you really want total control, I would make the blog a subdomain of my primary domain.
I really don't think it makes that much of a difference, my recommendation is purely based on saving the money on a new domain.
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