If you are targeting these keywords and have pages for all of them on your website I would consider trying to get some deep links to the main categories of these sections. That should give you enough link juice deep down in your website and if done correctly should push you back up to number one.

Well thats what I would do.

Sorry to say this, but in the world of business isn't it who can build the most stores wins?

Think about how unfair it is for Amazon to have an affiliate program that has what? Tens of thousand of participants? That would mean they have tens of thousands stores online which cripples the competition.

These pages will likely not last very long. It always takes Google a while to sniff these sites out but when it does they'll be history.

It is having an impact on the number of visitors my site receives, a small one but it's noticeable.

I wouldn't waste too much time on it if the impact is small. Just focus on making your site better. It is nearly impossible to control what other folks are doing.

I would just keep an eye on them, make sure they keep it clean. If they start to break the rules to manipulate serps, then report them to G.

I think Google will flag them as they belong to the same person and also as thin affiliate sites ( as they are just 1 page only).

200 new sites? sit and watch.

they won't have 200 dif ips or servers to they will raise a red flag upon themselves.

Having a good and effective website takes hard work. No way that army of 200 sites would be rock solid. Relax.

Just fill out a spam report.

Here is a new way of thinking. How about contacting the webmaster first? It can be civil. In fact, you could simply inform him of the problems he's going to run into soon. A massive Google penalty is in their future. Now, you could be nasty about it, report them and not say anything. Or on the flip side you could do the nice, civil thing. Although everyone is jaded about this type of thing, it's possible that they are not understanding spamdexing or that different keyword phrases don't count as different sites. In fact, you could link them to this very thread. I would certainly be able to share the horrible experience a Google penalty has been for me. Again, if you want to be nasty, let them fall on their sword. I guess it depends if you believe in Karma. Remember folks, everyone don't know this system as well as you. People can and do make mistakes, and yes, some people get carried away. Not everyone is aware of their impending fall from the cliff onto the rocks below.

No worries. Krap in=Krap out. As described these sites will shortly (inside a week) -950 and won't be a problem.

I haven't come across 200 one-page sites but I have seen sites with hundreds of one-page subdomains, each targeting one keyphrase. The worst I think will happen is that the 200 sites will simply drop from their top position because other sites are more substantial and relevant for each term. Getting decent links for 200 sites is a tough assignment and this is where they'll stumble.

Every single new domain name is an exact match for the keyword term and what bothers me is that almost all of the new sites rank #1 for the longtail keyword

Just because you don't like the #1 site for a particular SERP that doesn't give you the right to report it as SPAM.

I'm inclined to think that if I wait it out they will eventually fall from the index but if they don't, what then?

Get better quality links than them.

Getting decent links for 200 sites is a tough assignment and this is where they'll stumble.

Step 2 of their project would likely be to build 2000 sites on all the free hosts out there and use those to link to the 200 sites. That gives the 200 sites enough juice to continue to be #1 on their own long tail terms and gives them a bit of authority to push the main money site they're linking to way up.

Sounds like BradleyT just launched 200 websites ;)