tedster - 6:24 pm on Nov 24, 2010 (gmt 0)
Yes, you may have made a mistake, but it's nearly impossible to say without an intensive study of your specific website - something that is outside the scope of this forum.
Making big changes to the main navigation is a major change to your site, not just a tweak. From your description, the results you are seeing now are something in the direction you hoped for, but with other consequences that you weren't hoping for.
Add into the mix that over the past month Google has made changes on their side that rank now internal pages more frequently - so everything you're seeing may not be a result of your own changes.
Reverting to your old navigation is a possibility to consider, however that may also complicate things further. Since the algo has evolved, you may not see a return to old rankings. Also, Google might see another major change as an attempt to manipulate them (which it is, sort of) and hand out a penalty.
I'd consider building from where you are - one well-planned step at a time - rather than backing up. And I'd also work more with links in the content area rather than lots of changes the main navigation. If the new navigation serves your customer needs better, that's a key factor.
How many total links were in the old navigation, and now in the new navigation?