Should NiMH batteries be fully discharged before recharging a flash?

NimH battery care and feeding has occupied too much of my life in recent years. :-)

It is significantly better for NimH batteries NOT to discharge them fully before recharging them.

NimH life can be enhanced substantially by never discharging them fully on any occasion. Even when using multiple sets during a day's shooting, if you can manage to leave the last 10% or so of capacity in the battery you will get substantially longer life from them. Similarly, if you do not charge them quite to capacity it will also extend lifetime. The latter is harder to do but, if you are able to monitor your charger and if you use a "fast charger" (around 1 hour for a full charge) then you will find that the batteries are very hot at the end of charge. If you stop charging when the battery temperature first starts to increase rapidly they will thank you for it longer term.

If you discharge to only say 50% ever you get more than 2X life cycles so a net whole of life gain in capacity per dollar. eg IF you get 500 cycles deep discharge (and it varies) you may get 1200-1500 cycles of 50% discharge.
500 x 100% = 500 cycles.
1200 - 1500 x 50% = 600 - 750 full cycles equivalent.

NO memory effect in Nimh batteries - One problem with NiCd batteries was that repeated partial discharge caused "memory effect" and the batteries lost capacity. Much has been written on this over many years. Modern NimH batteries do NOT have memory effect to an extent that you will ever notice. If you repeatedly carefully discharge them to exactly the same point multiple times you may find that there was a very very small reduction in available capacity. But this is removed as soon as you discharge them to any other point and then recharge them. It is not an issue of any concern at all. So effectively this means that you NEVER need to discharge your NimH cells, and you should try to avoid doing so.

Note that modern NimH cells MUST NOT BE TRICKLE CHARGED.
Trickle charging modern NimH cells at even VERY modest rates will very greatly shorten their lifetime. Older cells could be trickle charged safely at C/20 or even higher in some cases. Modern ones cannot. (C/20 = mAh/20. Si C/20 for a 2000 mAh cell = 2000/20 = 100 mA).

Older NimH AA cells (up to about 1500 to 1800 mAh capacity) had inbuilt arrangements for recombining generated gases during overcharging. The drive to achieve maximum capacity has resulted in this mechanism being removed from modern cells. ANY overcharging will result in gas generation. This will cause pressure relief valves to operate and the gas and so the water content will be lost. The battery will rapidly dry out and die. As a "bonus" the venting gas will carry some corrosive liquid with it which may damage associated equipment.

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Charging NimH:

For AA and AAA cells I recommend the Powerex MH-C9000 WizardOne Charger-Analyzer.
Despite the silly name this is a superb device. Shop around - price varies quite widely.
The C9000 will charge, discharge, analyse, cycle and "recondition" NimH AA and AAA cells. It provides charge rates up to 2A/cell and discharge rates up to 1A/cell. This device is not perfect but is far better than all except a few chargers in this class that I am aware of. They are Taiwanese made. I use one personally and thought enough of them to buy one to take to China to give to a factory to assist them in battery testing.

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The following advice, quoted from the Batteries for less page which Eshwar cited, is incorrect. Not his fault of course. :-) But, it will not do too much harm.

NiMH Batteries need to be deep cycled once every 3 months or every 40 charge cycles to prevent the 'memory effect'. This is recommended for all Ni-MH batteries.

The initial conditioning cycles that they recommend also do little harm but are of arguable use. A NimH cell will be of low capacity for the first 1 to 3 cycles. (I have seen many cells assume very close to full capacity by the 2nd cycle. )

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Added - May 2014:

Here are a few more references. Note that the Wikipedia ref is to a 2002 paper.

Here is a Battery University article. BU is usually an excellent source of battery information. Here they somewhat contradict my original assertions. Some of what they say goes counter to the majority of modern opinion elsewhere. So I'll reference what they say and also a few other views.

Here is Candlepower forum user comment - CPF is usually (not always) an excellent source of practical information. Well worth reading.

Wikipedia - mentions NimH in the first few sentences then never again. Cites 2002 reference.

Green batteries
Leans towards voltage depression needing managing.

Battery stuff say: Older generation and batteries with other chemical make-up were subject to a memory effect. This is when a battery must be fully drained before recharge or their capacity is reduced. The New Generation of NIMH batteries do not develop a memory effect and can be recharged at anytime during usage cycle. When uncertain about battery charge level or condition, recharge it.

Dan's Quick Guide to Memory Effect, You Idiots.
DOES note voltage depression which is NOT memory effect but can cause issues. Also points out that just discharging a whole pack is often a very bad idea - and suggests alternatives.