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The interesting thing is: google refuses to rank the home page for these terms, they rank deeper pages like widgetexample.com/red
If you are saying that interlinking between owned sites appears to be your culprit
thin content with link to ecom site.
and post-EMD update.
Some sites seem to vanish with Penguin updates but the pages reside about in the same positions you mention with the link building.
why don't you try an redo the home page completely and see if it will recover?
second, it's my belief that whatever causes the target page not to rank (penguin or something else) has to do with inbound links and not on page factors. Something like: if (page) has x% of inbound links using (target keyword) as the anchor text then (page) will not rank for (target keyword).
We targeted a few main keywords and used an EMD matching the main keyword we targeted.
ink building was targeted to the specific keyword, no other links were built.