The only major LL that doesn't allow sponsor content that I'm aware of is Richard's Realm (by major, I mean it sends a good amount of traffic when you're listed).
I use sponsor content in 90% of my FS, because I think it's easier to sell the site with samples from the site. I have tons of bought content though, so sometimes I will put together a site with that, watermark the content to one of my portals and push a mix of my portals, dating sponsors and a regular sponsor in the same niche. Can't say much about better or worse conversions with either way - I think there are other factors which may be more important.
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