I know that there are content management systems that will not permit additional folders and some hosts make it difficult to use WordPress and other blog systems that connect to a database.

I have seen some of those problems myself.  However, my blog is important enough to the success of my site that I have.... changed hosts and hired experts to solve such problems....

In my opinion, if the blog is not in a folder then all of my work on it - every day for years - is being done for fractional returns.   So, I would be wiling to move a small mountain to get the blog in a folder.

Just an opinion....

I would increase the number of items to something higher than 15.  Will increase the count that is shown by google and when I visit your site to shop I will not be frustrated by the need to page through categories.  Might conserve linkjuice and prevent a little keyword canibalization.

I do not believe that there is a ranking difference between widgets.com and widgets.net  (I am getting my ass kicked right now be a couple of .net sites - those rats!).

However, I would not want to use a .net site because a lot of my return customers would by habit type egol.com as the URL.

Should I use one of the decent domains for a blog and build up the rankings, traffic, and link to the main site?  Or is this lots of work for little payout?

In my opinion, you are correct... lots of work for little payout.

If this company can contribute good content to a blog it would be best located in a folder on their primary domain.  That way, any links that are given to the blog by other webmasters will increase the power and authority of the primary domain.  It will also be a place to display the expertise of their company right on the main site.

Look at what SEOMoz has done... their blog is in a folder  seomoz.org/blog   and this forum is also in a folder   seomoz.org/q    this was  deliberate to concentrate links to their main site.

Some of the domain names are related to their name, others are keyword or geo-targeted. Would it be wise to setup 301 redirects going to their website?

This would be beneficial if you think those domains will receive type-in traffic.  If no type-in traffic occurs then there is zero value.

I recently 301 redirected two subdomains to folders on the primary domain.  The results have been kickass for both the pages in the new folder but also for pages throughout the primary domain. Rankings are up!

I believe that if your blog is popular and gets lots of links from other websites that the links from the blog to your website will carry value.  The more links the blog earns the more power it will transfer to your site.

However, I believe that if the blog was moved into a folder suchas at yourdomain.com/blog/ then the links that hit the blog will be more beneficial to increasing the authority and rankings of your main domain.

Look at SEOMoz... they have the blog at seomoz.org/blog and their forum at seomoz.org/q     -   folders instead of subdomains.