Yeah I agree it was not the cause of any penalty…that’s why I said “I wonder if it wasn’t something else that caused the penalty and then it was also fixed during the site update?”
Linking to bad neighborhoods or other “marked” spam sites will indeed hurt your rankings and/or cause you to be penalized or banned. That is why there is now a rel=nofollow tag on most blogs and/or places where it would be difficult to monitor and manage outbound links posted by other users.
Duplicate content filters and penalties are also very common, as people are always looking for fresh content to add to their sites.
The most common problem related to penalties or bans has to be hidden text in some form or another. I cannot begin to tel you how many sites I still see with hidden text and other unethical SE strategies in place. When I ask why the text was put there and hidden I usually hear “I was just copying my competitors site that is number one in the search results for my keywords.”
Well don’t copy competitors who do that!! They will not be a the top for long, as these are just temporary rankings until the search engines catch on.
It is a good idea to use your own ideas and content, then you do not have to worry about hidden text (unless you put it there), dup content or other design flaws that can cause less than desirable rankings for a site.
And stay away from Bad Neighborhoods, they will not help you even if they link back to your site 100 times!