Good info, thanks ethought. Hopefully we see some improvement in "high" quality domains that have been effected by this "minor" update.
I personally have been at this since before adsense even existed. I did it because I loved it and was fascinated with the potential and power of the web (I was not making any/much money in those days).
Google has done many great things for the web (esp adsense). But it is updates like this that reminds me how much I dislike the amount of control and influence they wield today.
It seems clear that keyword domains should have neither preference or penalty (other than what they collect naturally via other algo metrics... such as click through rates).
It is healthy to remember that Google is a corporation and business first. I am not so naive as to believe that EVERYTHING is always done to benefit the user/customer or improve their experience.
The quickest way to put the focus on the customer is competition! I think everyone would be better off if the search market share was split evenly three + ways today! Can you imagine if we had three different adsense caliber programs to choose from as well? I hope we get there one day.