Too much "SEO" advice nowadays seems to consist of abusing the search engines, using dubious content in a web site. If you're interested in the needs of your readers, you should focus upon relevant content in, and traffic into, your blog or web site.
If your goal is truly focused on improving your readers experience, using a Google custom domain properly can help you integrate traffic from a Blogger blog (or blogs), with your web site traffic, by putting all traffic in the same domain.
- Traffic to the blog(s), which previously would have gone simply through "blogspot.com", now goes into your domain.
- Traffic into the blog, from the web site, which would formerly showed up as exit traffic, now shows up as traffic inside your domain.
- Traffic between your blogs now shows up as traffic within the domain.
- Your readers will see the blog and domain as one unit instead of two, bringing more repeat traffic from them, and increasing search engine value.
So I won't discuss "SEO", simply for the sake of "SEO", but I will say that integrating blog(s) and web site traffic will be a win-win situation to you, as long as you currently have relevant traffic to both, and want both strengthened. And hosting your blogs in a custom domain will let you do that.
However, publishing your blog to a custom domain is most effective when you integrate the blog, strategically, with the web site.
Along with SEO, comes the inevitable question about Page Rank.
What happens to my Page Rank, when I move my blog to a custom domain?
The answer to that is two fold.
Initially, your blog, at its new address, will have a Page Rank of Zero. No indexed links, from other web sites, to the new URL = no Page Rank.
As your readers, and the search engine spiders, point directly to the new address, your page rank will pick up. This won't happen immediately, but since your blog has intrinsic reputation - people and search engines know of its value under the old address - references to the old address will be forwarded automatically.
Your visit count from established links will remain constant, and will fuel your Page Rank recovery. With a mature blog, and lots of fixed inlinks from your readers, you'll lose Page Rank immediately (a new URL starts with no page rank) - but your inlinks, as they are updated, will bring your Page Rank back. The higher page rank of the web sites with the inlinks, the more often your blogs will be re indexed, and the faster your page rank will pick up.
Besides inlinks from your readers, you need to consider the search engines, and similar robotic services. You will have to update the URL that defines your blog, for services that use a URL to your blog. Services like AdSense, FeedBurner and other custom feeds, Google Sitemaps / Google Webmaster Tools, and the various free visitor meters won't use only DNS. They will need the new URL, updated manually by you, in their setup.