Well it seems kind of an obvious thing to test, everyone is accepting that nofollows dont pass pagerank and hence a site cant rank using them alone.
But I believe google still uses predominantly incoming links to rank a site and since every man and his dog is merrily nofollowing every link google's algorithm would be broken by now, so I think there is a lot of FUD spread by them and they still have a benefit.
Google said nofollow does not passes PR, they did not say that nofollow links are ignored in ranking alghorithm - which, as we know, has more than 200 factors. I am also really interested in your experiment as my opinion of nofollows is the same as yours. I also think citations help too, perhaps indirectly via trust factor.
If you imagine a really authoritative and trusted site giving you a link - great. The same site giving you nofollow link - I think it would still count somewhere. Not giving you link, but there is a "citation" - expecially if the text of the page or aroud citation is semantically connected to your niche/keywords... I think this helps too as it shows some kind of "popularity", albeit not measured via PR, but there is still some kind of "web popularity".
"since every man and his dog is merrily nofollowing..."
It could reach an overdone level and my feeling is Gorg didn't realize it could cause a problem. Perhaps small for now, but how about in a few years? I noticed a smallish site I exchanged links with five years ago(same industry) whom I never thought knew much about SEO started, no following. Thanks for telling me fella...his link was yanked.
Too cynical for my taste, anyway, yes. I've even been considering a separate thread about how both the Google-fan and the Google-critic points of view can cloud judgment.
Besides, I don;t think the really problematic spammers would stop anything they are doing unless it stopped working - doesn't matter what Google says. So the anit-spam workload would not fall off in the least.
I have at least one page with a tool bar PR that cannot be explained by its incoming links. It does not have many internal links, and the only significant external links are multiple links from Wikipedia (all no-followed).
The other explanation is that toolbar PR is not just incomplete or out of date, but a flat out lie.