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To summarize, for its basic KW: Site A always ranks #2, with an indent. Site B ranks page 8, unless &filter=0 is used, in which case it ranks #3.
History:
Basics: Site A - subdomain placed on a 6 year old domain, never "sandboxed." ie. it ranked immediately. Site B - 4 year old domain, but "sandboxed" after an overhaul (new content, filenames). Both A and B ranked well initially. No interlinking.
2. June of this year, we linked B heavily to A using varied anchor text and lightly to other sources. We linked from within paragraphs. No reciprocal links.
3. Site A is quickly boosted in the SERPs and takes clear benefit from the link text in B. Site B effectively vanishes, although it is really the better resource.
The experience would suggest that the duplicate content filter captures strong affiliations, and that the site linking out is the one to be suppressed.
Could sandboxing be a result of too much linkage, or is this another filter?
Site B vanishing is what necessitated my interest in SEO, because the linking out made the site more useful and yet it decimated it. If anything site A would be better off with the lesser visibility.
Prairie.
I'd look elsewhere for the cause of the fall, maybe you "overcooked" your linkage trying to exit the sandbox?
Apart from linking out, we did nothing, and the site being linked to rose in the SERPs.
Even though these two sites are hosted in different countries, I think Google now regards site B as an affiliate and won't show it in results at the same time as A. Perhaps if site B has dealt with a broader range of keywords or topics, it would have been ok.