Maybe someone can throw some light on this: I use "CheckSpelling on" in my root .htaccess. I also use 301 permanent redirects to direct to the correct urls, misspelled urls from sites linking to my pages using wrong url strings (there are quite a few of these. This is mainly to tell Googlebot which is the correct url. I was paying for a lot of bandwith with Googlebot's spidering of these wtong urls. With the latest update my site has gone from page 1 SERPS to pages 3 and 4 and it appears it has been penalized. Since the only significant changes I did during the last few months were the above couple of .htaccess modules I wonder if they have anything to do with it. Is it possible that Google doesn't like this sort of thing? By the way, all my pages are indexed but the number of pages shown as indexed by searching "site:mysite.com" appears to be triple the actual number of my pages". My site never had more pages than at present so it's not a matterof old pages indexed. Would mostly appreciate any insight on this.
G's site:domain.com is probably screwed up as well since its link:domain.com doesn't work.
The G update is still going on (even though the threads are shut down), so I doubt anything you did to your htaccess file caused the drop. HOWEVER, I AM noticing that every time I add my 301 redirect I seem to DROP in the G SERP's. I remove it, and I climb back! This has happened about 5 or 6 times, and right now it's added. So if I drop again, then remove it, then climb back, I'm convinced that at least a 301 of non-www to www is hurting me. So, there could be, MIGHT be something to be said for the "Checkspelling" you did.
If you've had your htaccess file like that for a month or more, then you dropped, and that was several weeks ago and you are still dropped back, you may consider removing it for a few weeks and see what happens. Unfortunately it's all a waiting game for everyone.