CainIV - 6:48 am on Dec 6, 2010 (gmt 0)
I think that the link equity lost in the drop between levels is insignificant compared to the semantic confusion that many sites have with a hundred or more nav links on a page.
Very intelligent way to look at the process. I take supportive pillar topics in a hierarchical structure over flat file structures for this reason any day. Often 1 link is enough to gain top 5 rankings for long tail terms, and that trust and relevance is passed up to the level above it (and related content on the same level if related links and breadcrumbs are used well.)