wesmaster - 3:20 am on Sep 28, 2010 (gmt 0)
I'm pretty sure 301s do not work in that manner any more...
I officially did my most recent redirect, mentioned above, about a week ago. The purchased domain, which contained 3 keywords that I am targeting, was #8 in G SERPs. It's important to note that this domain was registered and in the SERPs for 4-5 years. After the redirect, not only did the destination domain replace the redirected domain in the SERPs, it bumped the destination domain all the way to #1 for the 3 keywords. Now, the destination URL is relevant to the 3 keywords, so that helped it to put my site at #1. On top of that, the destination domain jumped two pages, from 4th page to 2nd page for the first two keywords of the 3, which (the 2 keywords) is the ultimate SEO goal for this website.
It's still early, and G could change their mind, but for sure the redirect did exactly what I expected it to.