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AFAIK, Dan is not one to talk out of his arse. I'm going to guess that he did some testing on the matter before recommending it. I'd ask him if he did some live testing if I were you.
I generally avoid using nofollow on any links I control and my sites/pages are doing fine, but I have never tested a "more aggressive" link structure using nofollow on links to non-desirable pages. Perhaps my sites would rank better.
One thing is for sure, it's possible to take the idea too far. IMO, it's basically what killed seochat (when the owners decided to nofollow every non seochat link on the site - angering the mods and existing community at the time).
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