sit2510, cbpayne and bsterz, thanks! You've hit on an issue I've been pondering (given my limited experience): namely the issue of time.
If I understand the prevailing wisdom, a link from a page that is a 7, linked to a lesser-ranked page, should produce a rise in the strength of the receiving page.
That is, unless it is under a no-pass penalty or simply has so many outgoing links that whatever value does get passed is so diluted as to be undetectable. (I hope I got that right.)
I have had frequent encounters with sites whose backlink's strength plainly did not seem to support their standing. My guess is that this is possibly the result of having previously been the recipient of a link from a higher-ranked page, but since the last update, the value of originating page has dropped. It seems plausible that somehow the relevant portion of G's database hasn't caught up yet (still showing backlinks from pages that no longer qualify).
I had been operating (perhaps mistakenly) under the impression that only a 4 or above passed anything appreciable to another page. I also thought that if a page showed as a backlink, that meant it was also passing PR. Recently, I seem to hear a growing consensus that it may have dropped to 3. Am I confused on this?
On several occasions, I have seen a couple of pages that appear as backlinks, whose rating was as low as 1. Even if the new standard is 3, how could a 1 show as a backlink (and therefore presumably passing PR)?
A lag-time between the update of a page's backlinks and the changing of another page's PR seems worth considering, I think.
aspdesigner is right in reminding us that the core of steven mheakyle's excellent question is essentially "But what is the time-frame now?" I don't know when the next PR/backlinks update will be, but I'd be very interested in hearing anything that could reassure me that they are both done at the same time. If I knew THAT, I would be even more enthusiastic about finding out when it will occur.