A recent reader expression of apprehension of converting blogspot blog to custom domain is the reason for this post. Worries about the effect of conversion to custom domain is very understandable as it involved a change in URL of the blog. What I can offer is my own experience in custom domain conversion and address one particular concern, does the old URL (including the old permalinks) redirect to the new custom domain URL's.
For traffic, I have published a previous post Effect of conversion to custom domain on traffic where I showed that it had no effect on traffic on my blog (please note the emphasis. I do not guarantee the same for yours). Further in that same post, a commentator complained that it affected traffic to his blog tremendously, but probably he registered his domain direct via Godaddy while I did it via Blogger. see Advice: upgrade to custom domain via Blogger.
Now to the other point about redirecting traffic. Below are 3 permalinks with new custom domain permalinks and below that are 3 permalinks of the same post but with the old blogspot permalink. Confirm for yourself that they do redirect to the new custom domain permalinks.
New custom domain permalinks:
old blogspot permalinks
Note that your PageRank will definitely be affected initially and it may take time to recover your previous PageRank, but that didn't seem to have affected my blog traffic which is what is important to me and not specifically the PageRank.