Here you can find step by step guide how to optimize Wordpress post titles. To find more searh in Google: post title optimization for wordpress
Use targetted KW in Title & where u post yr content in btw put yr home page link & ther main page link via Anchor Text. Anchor Text shud be yr most KW as most SEO friendly.
There are only two plugins I recommend for SEO when it comes to WordPress - Optimal Title (which puts the page title before the blog title), and the All In One SEO Pack (which handles per page/post optimization of metadata).
Actually the newer versions of All-In-One SEO automatically does the Optimal Title functions. It's always the first plugin I install with a new blog. MVP -> Most Valuable Plugin.
Also, a blogger once recommended to me a plugin named SEO Slugs. It changes your post slug to remove words like "the" and "or" and just have those keywords. If you're really into seo optimizing you might check that out too.
Mike, I have the latest version of the All In One SEO pack, and I haven't seen anything like what you have mentioned regarding optimized titles. Though perhaps it has to do with the way my sites are structured. *shrugs*
I always hack my Title code manually, the default Wordpress is horrible especially with those double arrow seperators. I do mine: Pages: Post Title Category: Category Title Index Page: Blog Title Short and sweet.