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Tangentially, Johanna Rothman gave me another reason you should allow/encourage your employees to blog.

So you know what their interests are!

It's all too easy for you to see them for what they do at work (because you told them to) and not dig deeper into what makes them tick--even more importantly, digging into what's keeping them ticking, today.

This is especially true with respect to technical people (not just geeks, but anybody with a specialized skill-set or craft) who may not communicate externally that much or that often, you may find yourself losing talent for suprizing reasons. 

For example, you may find that you're losing people not because of money (though, that's what they tell you in the exit interview) and not because they don't like you (though, that's what they tell their buddies around the water cooler) but because they think they don't have access to opportunities that others may have.

Allowing/encouraging your employees to blog is a way for them to have a creative outlet that may give you insight into what makes them tick... before the next recruiter finds out about it!