Duplicate content - 301 redirect - Google stats

Which of two mirror sites should I retain and which to redirect?

[girish]

My first post. I am a novice to SEM. I became a paid member of SEW a few weeks ago and have read more than 25 hours worth of postings these past three weeks about an issue with two of my websites. How should I handle the following:

I have two urls. One is the singular version of an important keyword phrase in my industry and the second url is the plural of that same key phrase. Both sites have exactly the same architecture, navigation, file names, and content. Only difference is IP addresses (both at same host). Until last month I hadn’t a clue that I was violating SE rules since I've been doing it all myself using FP, very unsophisticated. (I'm an insurance agent - not an SEO professional - duh!). I have also never applied SEM techniques etc to these sites (however, this is changing starting now).

Until a few weeks ago my two sites ranked in top 10 for this keyphrase (PR=5). Then traffic began to decline, and long story short, when I started to look into this I learned (from reading SEW) that the url with the singular version of the phrase is no longer being cached by Google. I am eager to correct the mirroring problem and I need guidance on which of the two sites to close. Here are the GOOGLE stats:

The site using the singular version of the keyphrase is no longer in Google’s cache. However this version clearly has the dominant stats.
site: www.singular.com = 1700
related: www.singular.com = 362
link: www.singular.com = 130

The site using the plural version of the keyphrase is still in Google’s cache. However its stats are significantly lower than the “singular” version.
site: www.plural.com = 294
related: www.plural.com = 24
link: www.plural.com = 7

If I redirect the lesser stat (plural) site could I possibly be sending it to a penalized (banned) url, since Google removed the cache of the singular phrase site?

If I direct the non-cached url (with the heavier stats) to the currently “clean” url will that ring Google’s bells?

I also have a secondary question. Both sites are hosted on IIS servers (no Apache). Which is the better method for accomplishing a 301 redirect for my situation:
1. set the “to-be-emptied” URL's IP in the registrar’s DNS record to point to the “keeper” URL, or
2. do a client-side 301 error redirect in IIS per the following instructions
[xoc.net...]

What should I do?