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1. Yes, definitely add it to your domain. There's no point doing a blogspot solution, and it could be terrible on something like myspace.
2. Content is very much king with blogging. The best way is once a week write a useful tip on how to do something. I did with a post ages ago, and it got me a hell of a lot of visitors, even to this day.
3. Really, you can go with one to begin with. If you're struggling, go with 2, until you're comfortable.
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