courier - 7:52 am on Sep 13, 2011 (gmt 0)
Like you I have been looking at this recently and my understanding of the nofollow rule, is if you are in doubt of the quality of the external site use no follow. What I think G is saying here is if the quality of another site is so poor I can not stand over it, then I should not be linking to it in the first place.
I recently put an information page on with several do follow out going links and linked this page of my home page. This site was was around #12 in G, and within days it went to #4 before dropping back to #6. This was the only thing I changed.
I looked at Matt Cutts blog, and it would appear that the links he links to are do follow.
This is just a thought, but links are after all what the internet is made from, they were there before G and will be there after G. Perhaps G is saying that if you use nofollow, in other words you cannot say if the site you are linking to has good content, then you are possibly linking to a bad source, and G will rank you down as there is a possible bad link on your page.