I'm convinced that rel="nofollow" does prevent the flow of PageRank based on my own efforts in PageRank sculpting. Worked as expected for me with no apparent problems. But I'm not convinced that it prevents the link from being "discovered" or included in the "link graph". I've seen nofollow'ed links appear in the Webmaster Tools link report, so they're in the system at some level. It may be that the system changed since Matt made his comment about that, or the link report gets data at a level that's technically distinct from the "link graph". But they're in there somewhere.