Wilburforce - 6:49 pm on May 29, 2012 (gmt 0)
Or is the link already shot since we used KWs in our link
Keywords in backlinks is definitely an issue (not sure about keywords in internal links).
It seems very clear to me that there is relationship between exact match anchor-text backlinks and search term. If masses of backlinks are for Widget Sales (which is what my business is), and the search term is Widget Sales, my page is a long way down the results.
This doesn't happen if the search term is Widget Sales Place, or Special Widget Sales.
One thought for a possible mechanism is this:
What if Google now counts exact-match backlinks towards keyword density in some way? My on-page density for Widget Sales may be reasonable (with an on-page count of 12). If there are 2,000 Widget Sales backlinks - OK, perhaps these are offset by some factor - it crosses the threshold, and there is nothing I can do about it on-page.