The concern seems to be that if they optimize their blog for the keywords they're targeting, they are in fact competing against their own Web site, and thus their own self-interest.
However, as long as all your properties are funneling traffic to your Web site for conversion, or able to handle conversions themselves, you have nothing to worry about.
It's more like the game of Monopoly: the more properties you own, the more traffic you're likely to get. (Except in this case people are happy to be your guest.)
In fact, if you add optimized, quality content at YouTube, Flickr, Squidoo, and other social media sites, you can really start to monopolize Google's search results for your targeted keyword phrases. And since photos, videos, and localized content are becoming more prevalent at search engines, you don't want to cede that opportunity to your competition.
To create quality content you should use a combination of some keyword research and the questions you get on a regular basis. Often, if a client—or just a random person—sends me an email with a good question I'll generalize the details and turn it into a blog post. Then I'll send them an email with the link to the blog post.
Not only are you helping out your customer or prospect in that case, you're creating content that can help drive more prospects to your blog, Web site, or social media presence.
Just remember to create keyword-rich links back to relevant pages on your site so you can continue the conversation.
For additional insights and sarcasm, follow Rich Brooks on Twitter.
Photo credit: Rich Brooks (yeah, that's me)