>Will this be penalised by the SE?
It can. Hard to say in absolutes. You want to stay away from feeding spiders redirects. They will attempt to index the destination page at it's real url. If that url is fluid, some se's will have a problem with it.
From my experience, redirection based on keywords is considered spam nearly 100% of the time.
>Is server-side better than client-side?
Yes always. Not only for se purposes, but usability as well.
>3rd level domains AND not effect SEs?
There has been some growing concern that se's and 3rd level domains are not on friendly basis at the current time.
>which is best
Static pages, no redirects, and no 3rd level domains other than good old www.