tedster - 5:24 pm on Feb 27, 2011 (gmt 0)
Since your situation has been going on for several cycles, it doesn't sound like it's related to THIS update. Instead, you're seeing what others here have called the yo-yo effect, and a few members have been discussing those for a couple years.
They are still mysterious - we have theories but nothing definitive. I've seen it hit one page on an major website - of a household name enterprise. In that case it lasted about 4 months! It seems to be some kind of statistical testing going on, but why is not clear.
And yes, Google can penalize a site, a directory, a page, or even just one keyword for a page. But I don't think the yo-yo effect is a true penalty. It's just a "phenomenon" based on wobbly trust for the higher position - throws the URL involved into testing.