There are a few things that make Tumblr less optimal for SEO out of the box.

1. Headers don't come with h1 or h2 tags out of the box.

2. Title tags default to the title of the blog rather than the title of the blog post.

3. blog.domain.com does divert some SEO juice from the main domain. [1]

I wrote a short post on some of these issues that you can read up on below. [2]

[1]: http://www.seomoz.org/q/blog-on-subdomain-vs-subdirectory-be...

[2]: http://wadefoster.net/post/43633476838/three-quick-wins-for-...