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I no longer count on Google, I try to focus on Yahoo and MSN. Yahoo and MSN aren't really that bad. They may not be as quick, and it seems the homepage counts too much at times, but its better than not being ranked at all, and they get you up there if you do proper work, even if it takes months.
Google is stale, and the most biased. You are not doing anything wrong, other than you are a small business and will not help Google make money. Since google is the market leader, they can get away with this, and do what benefits them. Its sad, but thats what happens when a company gets too big. And on top of that, what they may be doing is not illegal. It's their index after all, right? Remeber, its free to rank.
Very well put. Sadly the main Google guys don't seem to be fully aware of this process, they think they will be able to resist it. Good luck.