So DeepSand, what your saying is that if I link my PR3 home page and several other pages on my site to a new page I just created on that same site, that will help the PR go up on that new page?
If your new page is accessible from within your site, it's already "linked" and receiving PR from such.
However, rather than trying to manipulate the internal flow of PR, commonly known as "PR sculpting," you should focus on designing your internal linkage for the best possible advantage to your users. The easier it is for your users to navigate your site the more inclined they will be to do so.
The thinking is that that off-site blog will generate more rankings potential for the main site because it will be a valuable incoming link to the main site. While that may be true to some extent I still prefer on-site blogs. One benefit of an on-site blog would be that we can use the blog pages as potential landing pages for Adwords and other PPC marketing (sure we can do that with an off-site blog but it would require another click before they get to your main site)
Matt Cutts: Gadgets, Google, and SEO Matt has also recommend having a blog as directory in his post on Whitehat SEO tips for bloggers
I hope that helps as on-site blog will give you lots of inbound links with different Ip's to your main site.
I guess on-site is better.
When you speak about gaining backlinks, why on earth should anybody link to your main site pages which are in most cases no more than marketing hype?
People are more likely to link to the quality articles, blog posts, funny widgets etc. These can be posted on your on-site blog. Your blog entries will definitely have more backlink potential (read: backlink potential for your main site domain).
Would it really matter on which one is better as you can always do both? I mean there is no rule saying that a website should only have on site that could only be either "on" the site or "off" the site. just don't post the same things on those blogs as that will not be useful at all.
This question has been asked many times.
It always seems to end up with a pretty even mixed field with half people going one way and the other half the other.
I personally go for a subdomain.
However, I now believe that both methods will have their own seo benefits and that it would appear that both options are just as good as each other.