Can Dispel Magic remove blindness, per the spell Blindness/Deafness. I thought it should be harder than just a straight dispel check, but since Blindness is a "permanent" duration spell, it should work.
Is this just 3.5 confusion on my part?
Yes, at least for blindness caused by Blindness/Deafness
Blindness/Deafness has the following duration:
Duration permanent (D)
Checking the duration against the rules:
The energy remains as long as the effect does. This means the spell is vulnerable to dispel magic.
It's also worth noting that Blindness / Deafness is self-dismissible:
If the duration line ends with “(D),” you can dismiss the spell at will.
Finally, Dispel Magic has two caveats:
Some spells, as detailed in their descriptions, can't be defeated by dispel magic.
The effect of a spell with an instantaneous duration can't be dispelled, because the magical effect is already over before the dispel magic can take effect.
Blindness/Deafness is neither Instantaneous in duration, nor does it explicitly state that it can't be dispelled. Therefore it's fair game.
Note that some causes of blindness can't be cured by Dispel Magic. Blinding Critical was the first such ability I came across in a quick search of the SRD. Blindness like this (not caused by a spell) as well as most natural blindness must be cured via Remove Blindness/Deafness.
@AceCalhoon's answer is excellent, but I just wanted to add a little extra: Remove Blindness-Deafness might at first seem like a subset of Dispel Magic, but it's important to note that Dispel Magic can only dispel magically-induced blindness/deafness conditions, in addition to other magical effects, while Remove Blindness-Deafness can only cure those conditions, but works regardless of its origins. When the condition is magically-induced, then they happen to have the same effect.
From the dispel magic description, "A dispelled spell ends as if its duration had expired:. Since it has a duration of permanent there is no expiration of it's effect and dispel magic would not work.