I have enemies on both sides of me, so they have flanking. One of them has now become blind. Does this allow him to benefit from or grant flanking? Does this allow him to threaten squares around him as well?
When under the blinded condition, all things are treated as having total concealment from you:
All opponents are considered to have total concealment (50% miss chance) against the blinded character.
When a creature has total concealment, attacks cannot be made against them (though you can attack the square you think they're in, which is what allows the 50% miss chance rule) and AoO's may not be made against them:
You can't attack an opponent that has total concealment, though you can attack into a square that you think he occupies.
You can't execute an attack of opportunity against an opponent with total concealment, even if you know what square or squares the opponent occupies.
As such, blinded creatures can be considered to not threaten any squares, and as such cannot provide flanking.
Assuming, of course, that they do not have any other method of determining precise location (blindsight, tremorsense, etc...) and are not adapted to being blind (through extended time being blinded, usually years)