They both have their uses. Blogs are great for the se's and I use them as traffic pumps to my freesites/sponsor hosted galleries etc.....it works.
The days are gone when you could mass produce freesites with limited text...each one requires one on one attention to give it unique attributes that the engines will eat up....
For the link lists, build 20+ pic free sites....prime 'em with text for the engines and hope for the best.
You don't HAVE to update blogs daily....every few days is fine. Use all sorts of different sources for your entries....include links to your freesites etc....
A 'good' blog will wheel the surfer in and get them hooked to keep coming back for the next entry. I can't say I've managed to do that with ALL of my blogs....but I have a couple that have a loyal following.....and I get good traffic to my freesites/galleries because of it....and decent sign ups as well.
I don't think it's a matter of which is better....I think if you use them together you will get alot more bang for your traffic.
just my 2 canadian cents