I haven't been banned so far, but heard many times that after emailing Google support, you can be "unbanned", if it was really not your fault. It also takes much time...
Yes, I was. You can read about it here: http://forums.digitalpoint.com/showthread.php?t=191148 http://forums.digitalpoint.com/showthread.php?p=1866715#post1866715
When was that? If it was some time ago, try asking them again. They've changed their policy regarding pictures alongside ads, regardless of what pictures.
Bad traffic is NOT traffic that doesn't convert. It's when you buy ads where your site shows up in a popup or popunder or something similar. Basically when you buy traffic.