My personal opinion on this is that No, It doesn't. I have various reasons for thinking it doesn't, The main reason being that Google doesn't care about styling, They only care about content and information. So even if your site has broken tables and a layout that looks like something out of Texas chainsaw massacre why would google care? If it has the information that the searcher wants then it's the ideal site to send them to. We have to remember, Google aren't quality control, they are simply people we go to when we want to know what sites contain certain information. We don't go to google and say "show me a site that has the menu on the left and a blue background.".
Another good reason to think that W3C validation doesn't help with SEO is the fact that Matt Cutts, Google engineer who specializes in SEO, has said it doesn't in one of his grab bag videos. Matt Cutts said "Google have no signal for validated code". I read this as "Not only does Google not use validation as part of it's ranking algo, But it doesn't even have a way of telling if a site contains validated markup or not".
I figured you probably wouldn't be too interested in my opinions regarding W3C validation and SEO so i decided to do some research. I done a Google search for some of the more competitive keywords such as casino, Cheap flights, Hotels and web hosting to see if the sites that appear #1 in these results do in fact have markup that validates according to W3C. Here are my findings.
- A Google search for "casino" returned www.casino.com as the #1 result. This site failed validation. In fact, It failed because it didn't even have character encoding labeling.
- A Google search for "cheap flights" returned www.cheapflights.co.uk as the #1 result. This site failed validation because of a Character Encoding mismatch and 9 markup errors.
- A Google search for "hotels" returned www.hotels.com as the #1 result. This is my favorite, It failed validation because it contained No Character Encoding, Contained No DOCTYPE and contained 298 markup errors.
- A Google search for "web hosting" returned www.fortunecity.com as the #1 result. This site failed validation with 128 markup errors
As you can see, Having markup that does not validate according to W3C has not stopped these sites appearing top for some very competitive search terms.
Having said all that, if you were to ask me the simple question "Should i use W3C to validate my site?" i would say yes, you should. But not for SEO. Having a Validated site may increase your end user optimization and may mean more people visit, more people keep coming back and may even mean more people link to your site. But while these are beneficial to your site optimization and end user optimization they aren't SEO related issues.
When i make a site i simply check the site in various browsers to check the sites cross browser compatibility, But as for spending a day validating pages i just don't see the point. People are human and humans make errors. Google knows this and it's not in their interest to punish you for making tiny errors when your site has quality content or provides a great service.