Rasputin - 9:28 am on Apr 12, 2012 (gmt 0)
That's interesting, seems to suggest that if both sites are good quality then it's OK to interlink them (which is what I would have expected).
Our case is slightly different in that 90% of the pages on the subdomain are affiliate feed type pages, all with noindex since almost a year ago, and were already on the subdomain. There is no sign of panda recovery for the subdomain or the main domain (which is now good quality IMO) hence I'm wondering if the subdomain is holding it back.
I'm probably going to just remove the affiliate pages completely but had understood that would make no difference because they are already nofollow - opinions seem to differ on whether deletion is necessary for poor quality pages or noindex is enough.