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I will say sub-directory but my reasons are different; I think Google now consider sub-domain as part of the main domain. Here is the Google Webmaster Central blog that will give you more insight on that topic: https://googlewebmastercentral.blogspot.com/2011/08/reorganizing-internal-vs-external.html The reason why I will consider sub directories as more powerful is because it makes more sense to user and also I think internal link juice flow better when the link is moving from main to sub directory instead of sub domain. Also, if you ask experts within the industry they will also recommend you that. But, above all, double check about how your audience will react to it. If the audience is more comfortable with sub domain, you probably should choose that option. Just a thought! I will say sub-directory but my reasons are different; I think Google now consider sub-domain as part of the main domain. Here is the Google Webmaster Central blog that will give you more insight on that topic: https://googlewebmastercentral.blogspot.com/2011/08/reorganizing-internal-vs-external.html The reason why I will consider sub directories as more powerful is because it makes more sense to user and also I think internal link juice flow better when the link is moving from main to sub directory instead of sub domain. Also, if you ask experts within the industry they will also recommend you that. But, above all, double check about how your audience will react to it. If the audience is more comfortable with sub domain, you probably should choose that option. Just a thought!

Kurt, Just wanted to let you know, I decided to go with option 1 above.  This is the long route, but the purest form of SEO.  It will cost me more money up front, and will take time to develop, but I think its our best bet for the long run. Thanks again for your help.  I understand the canonical tag better now. Rob

Yes, I am actually one of those third party affiliates, so I need to remove those pages from the index as currently there are 61,000 pages indexed (all duplicate, affiliate content). As I slowly build SEO pages I plan to index my SEO side of the site bit by bit. The strange thing is that teh SEM pages do have links, they are coming organically just from being in the publics eye.  In a way its a nice problem to have, as I'm hoping to capture the juice and funnel it over to the new SEO pages.  make sense? Best, Rob PS - i'm up for coffee anytime.  I'll let you know when I'm in town.

As long as you have the canonical tags set up correctly, then you don't need to do anything else with the URLs that have parameters in them. Google will eventually start dropping those URLs from their index.