Comment on Stallion WordPress SEO Plugin by SEO Gold Services.
What you described is how I’m using the Stallion SEO plugin settings, the settings other than the Categories and Tags are very easy to decide on (the recommended settings ** and ^^ settings, for 95%+ of sites).
The Categories and Tags settings depends on the site setup, which type of archive do you use most and which are better SEO’d.
I tend to use Categories as my main archives others use Tags, some use both. SEO wise there’s not much difference between them (the HTML output is the same), what I would avoid is a duplication of the same content through both sets. You wouldn’t generally create two Categories/Tags with the same content since it adds no SEO value.
A site about WordPress for example could have Categories and or Tags about each version of WordPress, WordPress 3.0, WordPress 3.1, WordPress 3.2 and all versions in between. Many site owners see Categories as their main archives, maybe a Category called “WordPress” and an almost free for all on the Tags with Tags, “WordPress 3.0”, “WordPress 3.1”, “WordPress 3.2” and all the versions in between and will link anything related to WordPress into the Category “WordPress” and all the above Tags.
The problem with this is the content (the Posts) that are listed in these Categories and Tags can be almost identical, the page you are reading now would fit in all the Categories and Tags I listed above and so would most of the posts on this site. This means on archive pages with this sort of setup the tags and categories are not unique, the only real difference is the name of the Categories/Tags and Google is smart enough to know this and will tend to consider some of the Categories/Tags duplicate and won’t index them.
Even worse than this is Tags for pretty much any word (not even keywords) used in a post (auto tag plugins are terrible for this), Tags usage like this are such a waste of link benefit! Unless you have a lot of link benefit entering a site (lots of high quality backlinks) a general rule of thumb is try to only create pages that can generate search engine traffic in their own right or at least support important pages because you can’t afford to waste link benefit.
If you have a setup like this I would look at the incoming search engine traffic and see which archives it’s coming from. If you find your hundreds of Tags aren’t actually generating any search engine traffic consider recycling the link benefit and concentrate on a smaller number of Categories.
It’s become difficult to obtain single word SERPs especially ones with any traffic attached to them, I no longer even bother optimizing for single keyword SERPs (Tags on most sites tend to be single keywords). Easier to aim for two or more keyword SERPs and Categories are quite good for two and three keyword SERPs.