Splugged, congrats! :)
Re: "better rankings, worse traffic." I have a well-ranked site that has lost Google traffic steadily throughout the past year or so. I couldn't find any other culprit, so my best guess was that Google just isn't where my audience is finding sites like mine anymore, i.e., the #1 rank in Google doesn't bring in the traffic it used to (and I am still sure this is part of it).
For about a month before Penguin 2.0, I started seeing something else, though. It looked like there were two data sets, one in which I was #1 for lots of terms, and the other set had me at #2-3 for some of those terms, at least at some times of day. Strangely, through about May 27 (three days after Penguin 2.0), I would consistently get MORE traffic on the days when my rankings slipped that tiny bit!
But around May 27 or 28, that shifted. Now I'm consistently ranking very well, and the traffic is up just as you would expect. So what was going on before that? Tedster, would any kind of user testing or something explain this?
My first thought was that I must have ads above me when I'm #1, but not when I'm #2-3 - that might explain a lower volume of traffic on higher rankings. But I checked AdWords and no one is bidding my top keyphrases.