Natural selection will take care of volume
A recent Seth Godin blog mentioned that a new blog appears every six seconds, and he asks, "when is tthere just too much noise?"
I don't think see a problem with the proliferation of blogs, because only blogs with relevance and style will succeed. Natural selection is a great "filter."
Plus, it's not a "numbers" game, as much as it's a "target market" game.
It's more important for most businesses to utilize a blog as a way to keep in consistent touch with clients and prospects at the lowest possible cost, i.e. customer retention, than it is to worry about the number of blogs yours has to compete with
Start with your core market, do whatever it takes to build consistent and intimate relationships with them, and then worry about what might work--or might not work.
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