I registered a lot of expired domains from http://expireddomains.powerhoster.com Some of them work very well and they do bring some traffic. About SEO, I donot see the difference between a newly registered domain and an expired domain.
Depends on their SEO history and keywords they were developed for. Some domain names can have very good SEO history.
Dropped domains are not useful is just like myth nothing else.It depend upon on page & off page factors of website.
I would suggest to only purchase dropped/expired domains. Reason for this is that Google has very high focus on the age of links and domains and if you are able to get a domain which has links pointing to it and is an aged domain then it is better than purchasing a new domain. Only make sure that the domain does not have bad history.