we recently moved to a dedicated host, so this was something I've been sort of considering: giving free webspace for our users (mainly forum-goers) that want to set up a blog. they can be about whatever they want; the only restriction we'd put on them would be that they'd need to link back to us from each page. would this be okay in the eyes of google and other SEs?
Sounds cool. Would the blog space be under your same domain name or separate domains? Under your domain, it would just be additional content on your site, so google would be very happy.
I'd offer either a subdomain on our domain or their own domain if they want to pay. google should treat a subdomain as an actual different site- although it's possible that there may be some sort of dampening just from the fact that they're all coming from the same IP.