Question: When creating links for an an html based email, how critical is it to use absolute links? Also, What are the benefits in using relative links in general?

Answer: 
For an html based email, absolute links are deal breaker critical, because they don't have the context of a web site to make relative links work. There are some mechanisms for setting the BASE of a document, but try feeding that to lotus notes...

Personally, on web sites, I try to use at least root absolute links /foo/yada.htm most of the time, because they are easier to test, and I never use parent path links unless putting something on a CD, like to have them turned off on the web server for security reasons. 

I work mainly with CMS/data driven sites, so don't have the pain of doing it by hand.
I like to use a constant for my top level domain, and then add on other parts to the link. This is just in case I change my top most domain name, but would like to keep the content/link intact.

For example:

COMPLETE\_SITE\_NAME = "<http://www.mysite.com/>";
link = COMPLETE\_SITE\_NAME . "pagetoContent.html";

Slightly slower, but a little bit more flexible.