I have a potential client who wants me to change his e-store links from <domain>/details.php?categoryID=123&productID=456&color=red to <domain>/details/categoryID/123/productID/456/color/red/ and so on. He believes that this will help his search engine results to have "keywords" in the URL. Is this so? I've never heard of Search Engines caring about directory names (as keywords). Also, isn't it true that Search Engines have no trouble any more following dynamic links? Is there any reason to change dynamic links into static?

Of course, he'll also need .htaccess changes to map the now-static URLs back to dynamic. I'll be happy to do the work ($$) but I'd like to warn him that he's wasting money (if it is in fact useless to change his site). What does the LP community think?

Try to minimize the number of clicks it takes to get to this page.

MrPhil, the most likely place where this has been discussed a lot is Webmaster World. Try a search engine "site:" search on relevant terms. You might have to join WW to read posts, but contrary to the implication on their signup page (through lack of stating otherwise), membership is still free.

You might also try the Google Webmasters Group at Google Groups.

I have some rather weak evidence that Google does look at terms in the URL string, but in a different context:

I preview pages in WAMP locally, and I'm behind a firewall, and I use content-targeted AdSense ads. My local site has the same name as my LP one, except with localhost in front of it.

The AdSense content crawler is unable to get through the firewall to look at the content of any page I'm previewing. However,

These days, the ads on my preview pages are most often site-relevant. I take this as an indication that they are seeing the name of my site in the previewed page's URL.

For pages that already exist on my site, many of which have unique names, the previewed ads are page-relevant. I take this as an indication that they are also paying attention to the page name in the URL, and are serving similar ads to my local previewed page that they would be serving to my remote page.

For brand new pages whose names have never appeared on the live site, I sometimes get subject-relevant ads even on those. For example, if the page is in my /msaccess/ directory, then that shows in the URL string, and I get ads about MS Access. If it's in the /msword/ directory, I'm more likely to get MS Word ads.

I can't really be sure about these observations, but it has been noticeable enough to catch my attention.  Back in the old days when I was new to AdSense (and vice versa), ads on my preview pages would be about random topics or public service ads.

Anyway, check the other forums, too. Google looking at keywords in URLs is the common belief these days, but as you are aware, many of the common beliefs about Google are debatable. 

Whether it will actually help to have keywords in the URL is what I'd consider debatable in this situation. There are tons of other ways Google has to determine what a site and a page is about. They surely don't need the URL keywords for that determination, unless the site is utterly deficient in every other way.

Assume that Google acts rationally... why would they rank a site higher in SERPS just because it has keywords in its URL? No reason at all.

Nonetheless, I can't even offer an opinion that I myself would rely on!, only the observations above.

This is for an e-store. It's the same number of clicks either way to choose a category and subcategory and browse the merchandise. The visitor never has to do any navigation or work with the URLs, whether dynamic or static. They just go to a store search result or a bookmarked page or Google result and they're there. Or so I understand.

I have no idea why the client is so insistent that his sites must have static URLs with a bunch of keywords in the URL. I asked him why and he just said that it would greatly improve search engine results. I'm going to tell him I'll do it, but that I think he's wasting his money (especially as the Google results will probably drop from 1st/2nd page for a while).

Maybe the client took what Matt Cutts wrote last year to heart:

This link might be useful:
http://www.mattcutts.com/blog/scoble-visiting-the-plex/#comment-78907

It was a mild endorsement. There can also be a contradictory effect when piling a whole bouquet of keywords in the url inclines the SE to consider it keyword stuffing.

If the client thinks he is contracting for an expected improvement in results page ranking, that's the broad basis on which he'd judge any specific work done.

Good Luck.