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A few things changed just before this big drop:
1) I made a major update of the index page, making it more detailed (from 300 to 600 words), containing more keywords (but still no more than the average density for my main competitors which rank 1-5). I can't see why this should be penalized.
2) I had requested the dmoz editor to change my site title from BlueWidgetStuff to Blue Widget Stuff. My request was granted (I know, sounds amazing to those that still are waiting to be included 1 year on...).
3) Logging on to google webmaster tools (which I sadly haven't done for the past few months), I see "URL restricted by robots.txt" for links.php and links.php?show=more (links.php?show=more was last disallowed 20/4 it says). It turns out that there is a slash missing in my robots.txt. My directory "link" is disallowed, but so is also links.php and links.php?show=more. This is where I have all my outgoing reciprocal links. What is odd looking at it now is that google found links.php?show=more, as it is only linked to from links.php, which was disallowed.
So 1) doesn't look likely (correct me if I'm wrong) to be the reason fro the drop. I don't know about 2). What about 3), would google penalize for hiding outgoing reciprocal links?
If I search for BlueWidgetStuff (my url - .com), then I am no1. Does that mean that I have not received a -60 penalty? If so, why have I dropped so dramatically, and how can I fix it?
Comments?
1. The robots.txt error would not be the cause though correcting it could be.
2. Page and title tag changes often create ranking fluctuations for a short period prior to stabilizing.
3. Look for other methods of link building rather than reciprocals (see link building forum on WebmasterWorld).
4. Algorythm updates occur frequently which may cause some of the fluctuations you are seeing. This or #2 may have resulted in a temporary boost (the 29 being the anomaly) and subsequent settling to the "proper" position (~100 mark).
I'm out of time but I'm certain that others will have further insight.
Logging on to google webmaster tools (which I sadly haven't done for the past few months), I see "URL restricted by robots.txt" for links.php and links.php?show=more (links.php?show=more was last disallowed 20/4 it says). It turns out that there is a slash missing in my robots.txt. My directory "link" is disallowed, but so is also links.php and links.php?show=more. This is where I have all my outgoing reciprocal links.
your link partners may have found out that your outgoing link directory is not indexed and removed links pointing back to your site.
"Pages with internal links", only a fraction of my pages show up. I'm quite sure they were all in there in the past.
a change in internal link structure may have also caused a drop.
take a look @ google's tips on requesting consideration if you think there are issues a request can fix:
Google search quality group gives tips on reconsideration requests
[webmasterworld.com...]
I'm not certain that this applies because the OP is referring to internal links rather than external in Webmaster Tools.
"a change in internal link structure may have also caused a drop."
This is quite possible. @goinggoinggone have you changed your navigation or internal linking?
A few reciprocals make sense. A huge list just for search rankings is never a good idea.