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$1300 isn't much money. How much do you think you would make if you rediesigned the site? We can't give you a good answer with such skimpy information. Also the decision on the 301 needs more consideration.  You need to think about relative rankings, traffic, unique link sources,  duplicate content issues, keyword reach of the sites.

Another idea I had for a useful piece of content depends on how small your town is. If it's 800 people like my dad's hometown is, it's not going to work. But if it's 20,00+ people, try writing a guide to the neighborhoods the way the locals talk about them. I lived in the Orcutt area of Santa Maria, CA for over 20 years in the "old oak knolls" area. Everyone local knows what it means, but you won't find that area on any map. There's only two Google results for that phrase, one of them being a real estate agent who lists a lot of her properties by the development name that's now 20-40 years old and has no sign marker anywhere. When I had a friend who had moved there from Oklahoma and was looking to buy a house, I sat down with her and gave her a list of division names that were in the area that she was looking for, and divisions to avoid. There was no map or resource to go to for that. Think of how many searches you could come up for if you went through and collected some of that type of information. Another thing to do in larger cities would be to give a translation guide to the traffic reports for that area. I have lived in the San Francisco Bay Area for over ten years, but have never been able to find anything that tells me where "the foot of the maze" vs "the parking lot" "top of the incline" etc. when it comes to backups on the bay bridge, but that's what the traffic stations call things, how stuff gets tweeted, etc. If there were someone that mapped out all of this stuff, imagine the links they could get.

Google Keyword data from the keyword tool is only updated on a monthly basis, trends data is updated more quickly. Another thing is that keyword tool data is an estimate, I have written a post on alternant keyword research ideas on the SEOmoz blgo recently: http://www.seomoz.org/ugc/advanced-seo-keyword-research-tips-and-ideas-14216 Hope it helps

I wrote about this topic a bunch here: http://www.seomoz.org/blog/white-hat-seo-it-fing-works-12421 but basically, I ask myself a number of questions: What are my goals in web marketing? Is it purely to make the most money possible? Am I trying to build something bigger than myself? Something that will make people happy? Something that can last even if I'm not around? Do I want to prioritize the short term or the long term? Can I afford to make more revenue, get more traffic in the next 6 months, if it means the 5 years after that might suffer? Do I want to work on building a brand and a company and a product or just a website that gets traffic? How much stock do I put in Google's webspam team vs. my ability to outthink them? Do I have the mental discipline to withstand the nervousness, doubt and fear that comes with spamming/manipulation the engines? Do I think that spam and low quality sites can convert at the same rate as a high quality brand? If not, does the delta make spamming non-viable, even if my only goal is revenue? The answers to those questions for me are clear, and they're what's led me to always pick white hat for the projects I do. Hope that helps!

Order of heading tags is important... use CSS to control size & tags other than headings! Think of a HTML doc as you would any other academic document.. Animals Cats Red Cats Pink Cats Dogs Round Dogs Square Dogs ..you get the idea

Thank you.  Very helpful, Ryan.