I asked an SEO expert whether our own website or a popular blogging host would be best for a blog, and he said definitely our own website. I didn't ask why but if it's a blog that interests people it'll act like link-bait, so the links will be coming directly to your site rather than to someone elses. Also, extra pages helps increase your PageRank. I suppose this is more beneficial than having links back to your site from places like Wordpress and Bloglines.
Setting up the blog in a sub-domain on your existing website benefits to your websites search engine ranking. Any new content that is added to your blog will be treated as new content part of your main website.