wheel - 11:31 am on May 21, 2010 (gmt 0)
With traffic I mean, in this case, visitors mistyping the URL of my competitor (hwitewidgets.com) or following misspelled incoming links.
I wouldn't touch a typo of my competitor. I think that's a recipe for grief if your competitor finds out. If all of a sudden it's fair game to take traffic that is explicitly looking for them, then what will they consider fair game for you?
Last I checked, dropped domains get reset for ranking.
Really? How recent? I've bought drops this year that ranked just fine on new, related content.