Canonical and Rel=next/prev Implementation
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The canonical tag is about telling the search engines what page you want displayed as the authoritative page in a situation where you have possibly tons of duplicated content.
The canonical tag does not control how many items get displayed on your site. So, you should find the most relevant page for a certain item or class of items, and use the canonical tag for that page thus telling the search engines, "hey I have tons of duplicate content, but here is the page which makes the most sense to put into the search engine." Among other things, if you don't use the canonical tag in a duplicate content situation, the search engines will then pick which page they think is most relevant to rank and push the other pages down. The page that is picked may or may not be the one you would like to rank.
Hope that helps
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Hi,
The good news is I've worked on very similar projects before and taking a look at your examples, you're configuring it almost by the book except you shouldn't use rel=next/previous and a canonical. It's either/or, so you're probably going to need to ditch your canonical.
i.e. http://googlewebmastercentral.blogspot.co.uk/2011/09/pagination-with-relnext-and-relprev.html
However, I've configured sites almost exactly as you have and found that Google has just randomly chosen different (and multiple) combinations of page and sort order to rank in different sections. Once they get added to the index, it's a real chore to get them removed.
I've learnt that if you genuinely don't want your sorted pages to appear in SERPs, you should use AJAX (and not have AJAX crawling turned on) e.g. "/?pg=1#dir=desc&order=price". Everything after the hash won't get crawled by Google. If you can't do AJAX, then you can add noindex to sorted pages and (at your own peril) nofollow / robots.txt to stop some pages being crawled. Using nofollow / robots starts to move into crafting page rank though and IMO is to be avoided.
Another approach to avoid pagination and the performance impact of very long lists is to create more subcategories to break the inventory up. Might not be possible for your inventory, but worth considering a complete side step.
George