Rand Fishkin in his website has a post of an interview with Matt 'the Google Guy Cutts'. Not your usual interview, well Rand Fishkin is not ordinary interviewer either, this one features a funny multiple choice questionnaire.
Ques: Does Google recommend the use of nofollow internally as a positive method for controlling the flow of internal link love?
A) Yes Ã¢â‚¬â€œ webmasters can feel free to use nofollow internally to help tell Googlebot which pages they want to receive link juice from other pages (Matt's precise words were: The nofollow attribute is just a mechanism that gives webmasters the ability to modify PageRank flow at link-level granularity. Plenty of other mechanisms would also work (e.g. a link through a page that is robot.txt'ed out), but nofollow on individual links is simpler for some folks to use. There's no stigma to using nofollow, even on your own internal links; for Google, nofollow'ed links are dropped out of our link graph; we don't even use such links for discovery. By the way, the nofollow meta tag does that same thing, but at a page level.
Ques: Google has noted in the past that a maximum of 100 links per page was wise and would insure that all of the links on a page would be crawled. Does this rule still apply or is there some flexibility?
A) The "keep the number of links to under 100" is in the technical guideline section, not the quality guidelines section. That means we're not going to remove a page if you have 101 or 102 links on the page. Think of this more as a rule of thumb. Originally, Google only indexed the first 100 kilobytes or so of web documents, so keeping the number of links under 100 was a good way to ensure that all those links would be seen by Google. These days I believe we index deeper within documents, so that's less of an issue. But it is true that if users see 250 or 300 links on a page, that page is probably not as useful for them, so it's a good idea to break a large list of links down (e.g. by category, topic, alphabetically, or chronologically) into multiple pages so that your links don't overwhelm regular users.
Based on the interview with Matt Cutts, Rand summed up:
"Nofollow is now, officially, a "tool" that power users and webmasters should be employing on their sites as a way to control the flow of link juice and point it in the very best directions. Good architectural SEO has always had some internal link structuring work involved, but nofollow and Matt's position on it makes it clear that for those of us who are professionals, we can be use it intelligently without a downside risk.
Read Matt Cutts on Nofollow, Links-Per-Page and the Value of Directories for more on the interview.