For some reason, my homepage has a PR1, while the rest of the pages on the site are all a PR2. They all link to eachother, and the PR2 pages all link to the homepage as well (twice on each page). Does this mean I have been penalized by Google? How do I fix this?
I don't think you will be penalized by google. Don't worry. I think the inside pages got the link from other websites. So you saw the difference.
It's too much of a coincidence that every single inside page was all backlinked from other websites but the homepage wasn't. Also, I checked my backlinks on some backlink checker tools and they're all linking to my homepage and not my inside pages.
Are all inner pages had PR 2? It's not that your website is penalized by google. Few months back i was also same type of situation,where one of my inner page got PR 2 and index page was having PR 1.but in next Pr update i got PR 3 for my website and PR 2 for all my inner page. May be in next update you will get a high PR for your website.