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To answer the question posed in the title, yes and no. Yes, keyword density does still matter but no, it is not as important as it used to be, and in some cases, keyword density is far less important than many of the other factors which go into determining page rank. In situations such as sites which are in relatively sparsely populated niche markets where the level of competition is low, having a somewhat higher keyword density (without overdoing it) can make a bit of a difference.