One website or twenty geo-targeted sites?

We have a client/friend who is asking our advice on the following:

He sells a product (widgets, of course) in several physical locations scattered throughout two states. The business is a year old, and the sites range from one year to a few months old. The Worpdress sites are well optimized and are ranking nicely for a lot of relevant keyphrases, including image searches. As new batches of widgets arrive, the owner has posts created about that particular shipment. And the bottom line is, the sites are bringing in buyers.

The sites are named 'widgetswashington.com' 'widgetsatlanta.com', and so forth.

The owner is finding it increasingly difficult to keep up with all the postings, so he's hiring a software company that will integrate his inventory control into the blogs. As a widget is entered into the system, relevant fields will be completed that will post it to the appropriate website.

The software company, who says they are 'Google certified', wants to move all of the websites under one domain - say widgetscalifornia.com/washington . They promise that this will be fine for search engines.

Our instinct is that this would be a huge mistake. The owner values our input, and we want to be able to be absolutely sure that we are correct and that we can prove our point.

So --- two questions. What do you think about moving the sites to one domain? AND why?

Thank you so much.