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I agree with all your arguments and indeed that's why I did exactly what you did (except that I no longer point my travel blog to the root.)
Oh, why do you say: "Is heavy traffic and site performance a consideration? In that case, using a single database might help site optimization." Wouldn't it be better to have separate databases to keep them from interfering? Simply because having too many tables and entries in one database but queried by two different blogs sounds kinda cumbersome, especially if you (and you will) use cache plugins.
You are right. It should be the other way round! Many thanks for pointing it out.
Couple points - If you are going to be setting up multiple WP blogs, do so with WordPress MU. believe me - it will save you headaches down the road if you continue adding blogs. Why? It's so much easier to update one set of core files than many.. Also you can manage plugins and themes much easier.
I always install WP in the root - for SEO purposes it's a no-brainer.
As far as after installation goes - I configure, setup backups first thing (http://bit.ly/backupplugin), then Seo/Google plugins, etc
Thanks! I guess I should have at least mentioned WPMU in the post. I wonder at what point it becomes optimal to use MU - 3 blogs or 4?