If Google identifies pages by their URLs, then multiple domains for one site is no different from a perfectly duplicate site with a different domain name. In either case Google will try to make sure that the duplicate sites are not awarded with duplicate rankings, so Google normally will block the additions domains. The theory is then, that in this case they blocked all of the domains, for some reason.
Indeed, many people do have multiple domains for the same site. Mine may have caught some attention because some high PR sites started linking to store.yahoo domain. So, the PR of the store.yahoo domain was getting relatively close to as high as the vanity domain. Maybe this made it look to the filter like we were trying to get both domains to rank.
The main reason the duplicate content filter seems most plausible, is because with the update was a change is the way Google views our different domains. Before the update each domain had its own PR and its own back links. After the update, Google has combined them altogether. When a search is done for the store.yahoo.com/hippygift-com/ (in order to check backlinks) it goes to the vainitydomain.com web page information. Now when I check for back links for a particular page, it does not matter which of the three domains was linked to, they all show. This was never the case before.