Can you explain "post on Freelancer Seeking Freelance every month" -- are you referring to freelancer.com? Is there a general "seeking freelance" feature to that website? In my experience, you have to apply to specific jobs. And the chances of getting any of them are extremely low, at least in my experience; it seems to be dominated by Indian and other 3rd world folks eager to build up their skills while working for pennies.

If you start out at a lower rate to build a good rep, how do you transition to a higher rate? If someone is referred to you from a previous client, I would think that a rate is shared and so they already have a number in mind for what you charge. Also, what about for recurring clients. If you gave them a better rate in the past and you have now bumped up your rate, do you honor your past rate or do you give them your new rate. For argument sake, let's assume this is not super frequent client that gives you stability, but maybe 15hrs of work every 3 months.

Does Freelancer seeking Freelancer actually work to find high paying contracts?

We've hired two freelancers from there. Only place I go now to find quality engineers.

Yes.

Did they come to you after you posted there, or did you go to them seeing their "Seeking Freelancer" listing?

I recommend doing both. It also pays (literally) to check the normal "who's hiring" thread as companies sometimes post contract opportunities there instead of in the freelancer thread.