I've had a difficult time communicating what you're experiencing. I have a theory, perhaps more than just a theory which really isn't seeing the light of day here. I have a name for it, but that's another story. I do know, I believe, what you are experiencing.
This is what I feel Google is in 2011. You're going to exist up until that tipping point of interest. You've just experienced it. You are a rodent in comparison to the "giants" that took your place atop the organic rankings. Don't be offended by "rodent". It's just a word that I would suggest regarding how Google might classify your site.
It's what I call the "raising of the bar" for which in my opinion, there is no return. Well not unless there is a change of philosophy at Google. You have experienced the tidal wave. Swamped. Gone. Pummeled. Whatever description you choose it's probably about how you're feeling right now.
It's why SEO is meaningless in a lot of ways right now. It's because regardless of what one man can do, it will surely not stand up to the tidal wave.
I hope I wasn't too brutally honest. I think you will find others perhaps poking holes in my understanding, which is fine. Believe ultimately what you want to believe. Based on what you've said, I believe I've walked in your shoes.