Well said. By using separate domains to "target keywords", that is almost by definition working to manipulate the search engines. One domain can rank well on many different keywords -- it doesn't take a network of a domain per keyord.
Multiple websites can most definitley target separate MARKETS, tailoring their content specifically for different demographic niches or slices, even if it is the same product. But in this scenario, one domain's content would not be duplicated on another domain. To do well, both domains need to be rich in usefulness for their respective target niches.