It never ceases to amaze me how many web sites are badly designed, not just for SEO but for usability and graphical impact. Even big, expensive sites make basic errors in commonsense design such as having text overlaid on a graphic making it hard to read. The subject of SEO web site design is very much on my mind as I'm currently working on a new web site, 6d6 Fireball , a role-playing games site. I'm having to deal with all the normal design issues of making a large site site attractive and usable.

On the SEOmoz blog, they have a good article on how good graphical and usability design is as vital for success as designing for SEO:

There are a limited number of variables that search engines can take into account directly, including keyword placement, links and site structure. However, through linking patterns, the engines make a considerable number of assumptions about a given site. Usability and user experience are "second order" influences on search engine ranking success. They provide an indirect, but measurable benefit to a site's external popularity, which the engines can then interpret as a signal of higher quality. This is also called the "no one likes to link to a crummy site" phenomenon.