Yes, but I've found that the 'Sandbox Effect' applies - you may have to wait 12+ months for your blog pages to actually rank. The other thing is to look at your template: does each post have its own url? Change the template so that the main page and archive pages have permalinks to each individual post
Yes, google does spider blogs, infact it loves them. I had one blog ranked very well on google, but suddenly it disspeared, and I don't know why...Probably cuz of google dance. The bottom line is that the big G definitely loves blogs.
is it better to host your own blog on your own web server, or let one of the blog sites host it? We already have a web site and would rather benefit from improved rankings by having a blog there, but not sure if it will help.
On the other hand, hosting my blog on myblog.blogger.com for example, would benefit blogger than it would me.
Some default blogspot templates are NOT Google friendly.
True. I think all of the default templates give you exactly the same meta description for every page. One way around this is to incorporate the <$BlogPageTitle$> tag into the descriptions on your post pages so each will be unique.