An interesting post has been written by Eric Ward [searchengineland.com...] , which prompted me to get some consensus from website owners and SEO's providing advice. When applying surgery to a link penalized site [ aka Penguin ] , where have you drawn the line ? What dilemmas have you faced and how have you overcome, or lived with them ?
I doubt you will find a consensus because webmasters can rarely agree on anything. IMHO the real answer is that it depends.
When trying to address a penalized website it depends on how it has been penalized. Some penalties are automatic, others are manual. Some are time based and others do not expire. Some are content based, others are links based. Sometimes you just have one penalty and other sites are facing multiple penalties.
It also depends on the webmaster. Many webmasters who have been hit by Penguin do not have any real SEO skills. They blindly followed other sites that were knowingly taking risky shortcuts. These less skilled webmasters do not have the capability to ever repair their site. Unfortunately the ego can blind webmasters from realizing their true SEO skill level.
Let us not forget it also depends on the profit margin. If your site is making a little money it might not be worth it to save it. Even if you were making great money but new competition has come along or the product has it might not make sense to save it.
What is the long-term potential? If you don't have a strong long-term business plan then you might end up saving the website just to find yourself in another business crisis next year.
It depends on how much work it will take to save it, if you have the skills to do the work and if the potential profit is worth the effort for the future.
... and all of the above is from the perspective of someone that CAN dump a domain and walk away.
For 'bricks and mortar' businesses sometimes that just isn't an option. They might have that domain plastered all over their flyers, leaflets, business cards.
I've just been called in to advise on a site for a small business that has suffered from someone applying dated link building techniques to their .com domain. Thankfully they can switch to the .co.uk and start fresh with that and a new site (we hope) but they can't dump the .com - instead we are going to have to clean it up.
Something that probably took a few hours to set in place is going to take days or weeks to clear up.