micro-sites vs onsite content

Given the reality that Google is penalizing "web spammed" sites, and is publicly emphasizing quality content, I'd love opinions on the following choices of strategy.

If you want a summary of my questions, you can just read the first two points. If you want details, read on...!

What is better:

(A) lots of very similar on-site SEO/Keyword targeted pages?

(B) lots of my own microsites each with unique content with specific keywords in mind, all pointing to the money site?

The details for those who want to read on:

Assume I've found lots of fairly low-competition keywords for my website. Combined, they would generate decent traffic.

It seems to me that my choices are:

1. create onsite pages, one for each keyword, with unique content, titled and otherwise SEO optimized

2. to contribute to 3rd party blogs using the keywords, and with unique, well-written content.

3. create my own microsites using the keywords either in the domain name or as the domain title with corresponding content.

My concern with building a quality content site which is also filled with the right keywords is that it could quickly become a "thesaurus" site with a page for every conceivable variation of the main theme.... (cats, kittens, cat, felines, my-cat, your-cat, etc etc). To me it would look really artificial to my customers even if the every page has "unique" content. (as determined by copyscape or other analytical tool).

If the answer is to do a "thesaurus" site, could all the variations be put into a blog, or archives, so long as they're on the sitemap? This way they stay out of the main menu.

OR create individual microsites each with totally unique content, each using a specific keyword/phrase? I prefer this approach but wonder how it's going to look if they're all on the same server.

I'll enjoy hearing opinions on this.

Thanks