buckworks - 10:15 pm on Jan 30, 2011 (gmt 0)

so I did exactly that. Bad idea?

I say it's a good idea, especially since you said that you had internal links formed both ways:

www.example/subindex/index.htm
www.example/subindex/

If making that particular change has any relation to the ranking hiccups you're experiencing (and I'm not convinced that it would) it should recover as soon as the flow of PR within your site gets fully recalculated.

Even if that is part of the mix, you are wise to go on the warpath about the stolen content. That is a separate problem that calls for action, the strongest action you know how to take.