I wanted to get some objective opinions on the following situation as the folks I've talked to have mixed opinions:

I am currently working with a customer that has a great site and great business. However, when trying to figure out why they're not performing well in organic, I discovered that their main domain 302s to a deeper, internal page. So when they do come up in SERPs, www.domain.com displays as the URL, but then you are redirected to www.domain.com/internal/internal.html.

I asked why this was the way it was. There was no good answer. I don't think the current guy knows :( All he knows is it's been that way for a long, long time...

Here are some more statistics:

Yahoo site explorer shows the number of backlinks to www.domain.com (minus internal links) to be almost 10x that of www.domain.com/internal/internal.html

My questions challenged to the wise and willing are as follows:

*Given that there is no page at www.domain.com, are the outside links pointing to it providing any value to the site's link popularity?

*What impact should I expect if he figures out how to get his host to change his 302 to a 301?

*If the answer to question one is that the links pass zero value to the domain because they get blocked by the 302, and if the answer to question two is that the links that once didn't count will now count, is there any possible risk of shocking the system with so many links?

Awesome thanks to any responders - these are tricky waters to navigate for a newb like yours truly :)

It sounds like in this case a 301 should be used:
http://www.google.com/support/webmasters/bin/answer.py?answer=40151

Hi
Yeah you are right 302 doesn't pass link equity where as 301 does you should be able to change this via the htaccess file yourself thus cutting out the need for contacting the host. For inital shock to the system the links will lose equity for a while till the
SE relise they are being re-directed and then pass on the correct link equity to the new domain. He should get quite a boost once the link equity is consolidated aslong as his backlinks are relevant etc...
Hope this helps