For the earlier posters in this thread with webmasters discussing internal navigation...
tedster posted this back in April:
The site-wide demotion seems to flow backwards through the site's internal linking. This I'm still not totally certain of, but there does seem to be a pattern that says "the negative site-wide factor is strongest for pages that are just one click away from the really bad page and not as strong for pages that are more distant."
Google has assumed responsibility for user experience not just on the landing page (where they landed from Google), but also for the entire site. Thus the sitewide demotion of Panda. It logically follows if the same principle is applied, your site could/would be penalized in part based on the number of internal links to weak/low-quality pages. You would get in trouble for linking to these bad "neighborhoods" or pages within your site.