Labels N Google Indexing:Any Logic?

Recently I visited the Official Google blog where i found people claiming that labels and meta tags are not used by Google's Caffeine to Index the blogs.They are internal to the Blogs structure and play not part in the Indexing process.But I think otherwise.When I first created my blog,I used to club was blog with a lot of labels(More than 10,even 15) and I found that Google was not Indexing the Blog.Then I changed my template and then removed a few labels as it was looking crowded in my Blogumulus.Then out of 26 posts 21 of them were Indexed and I was really  happy.Then all of a sudden,Google De-Indexed my pages and it was reduced to 2.When I checked my robots.txt,I found many conflict Issues.Then as a trial N error,I enabled to show all the Labels in my Blogger.Even though my Indexed pages was still 2,my Blog was appearing in Google search N is currently occupying top spot in Irctc Greasemonkey Fix.So now I am confused!Does Labels really play a vital role in SEO operations or its just internal to the Blog template.Well one thing is for sure,If you have more labels,more traffic will be diverted to your post,but they will have a very tough time navigating through all the related posts N arriving @ the results.What do u feel?As per me -The More Labels You Display,The More Traffic.Am I Wrong Here?