I haven't been around long enough to put in a link in the post, but on the sitemaps group (http://groups.google.com/group/google-sitemaps) Google Employee (Perhaps Venessa Fox) had an interesting response to a question today. For me the most interesting thing is regarding the links. She doesn't say anything about bannation, penalty, deindexing, supplementhell, just "won't be counted" This is the most precise information I've seen from them on links. Matt Cutts will say something like "...take a look at how you link..." but not what that specifically means. I still say there's no such thing as a bad link. There may be bad linking behavior, like having your MFA site get 1800 blog and guestbook posts in one night, but the actual links aren't the problem. Long live directories.
Microsoft has a tool called "Strider Search Defender" that identifies sites that are advertised via spam to message boards, blog comments and guest books. Other sites that are also linked to are considered to also be suspect "spam", so it seems like there could be guilt by association if you are linked to by a site that also links to "spam" sites* http://research.microsoft.com/SearchDefender/ http://www.plagiarismtoday.com/?p=286 * It's not clear whether this is theoretical, or if MSN search actually uses the SearchDefender algorithms.
After the BidDaddy update Matt posted a comment that suggest that links from an to bad neighborhoods will get your site banned. I have personally worked on a site that was banned and I am pretty sure it was because of the links. After I reomved those and submitted a re-inclusion request the site showed up again.