I have noticed exactly the same thing happen to one of my sites that happened to backdraft7. It slowly fell down to page 3 then yesterday disappeared from the SERPs. However the same site has only slipped from position 1 to position 2 in google.co.uk.
What we have noticed is that the sites at the top (and all over page 1 & 2) rely heavily on just one type of backlink - blog comments!
It's possible Google has either turned up the relevance of this indicator or turned down the relevance of others to weed out blog spammers.
Blog spamming is certainly an over-optimization strategy that mostly leads to spamming.
I would be interested to know if this can be confirmed by other people on the thread. If you look at the top 2 or 3 site's backlink profiles for your keywords in Open Site Explorer (or similar) you may find they rely heavily on blog comments.
There is a free tool called link detective that can give you a visual pie chart to see the distribution of backlinks more easily.
I would love to see if other people are seeing this phenomenon.