How would you set up multiple local sites under main site?

I got a great EMD for a service I provide. It is a generic service that can be offered anywhere and is in high demand and has high competition so it's hard to rank. In addition, I purchased about 20 EMDs for specific cities for this service.

The way I see it, I have 2 options:

1 - build 21 sites - one for each domain. The problem with this is that the content will be virtually identical on all of the sites. The only thing that would change would be the keywords on each site.

2 - build 1 site and 301 the 20 local EMDs to the main one. This is tempting because setting up 21 sites will suck. However, can you rank a domain that is being 301d? I've not done anything like that before so I'm not sure how it works.

So, if my main site is widgets.com, can i do a 301 for the URL chicagowidgets.com and then rank chicagowidgets.com for the keywords chicago widgets, widgets in chicago, find chicago widgets, etc?

Or, does a site have to have content for it to rank?

I'd appreciate feedback from anyone who has done something like this. I'd like to save the time, but not if it's going to be at the expense of my SERPs for all of the local rankings.

Thanks!