A basic question about bitcoin's anti double spending mechanism
The correct answer was given to me here: http://forum.bitcoin.org/index.php?topic=27979.msg352498#msg352498.

The gist: The entire value of the output contributes to the subsequent transaction, so if you wish to transfer smaller amount, you must add an additional output on the second transaction to send the remainder back to yourself.

Note that the accounting is done for transactions outputs and inputs. The block concept is not necessary for the verification process and is only used for technical convenience.