np2003, here's some background on "text link placement in themes/templates"
, about a similar penalty, discussed in this April 2012 thread.... Google wants me to remove links from sponsored WordPress themes http://www.webmasterworld.com/google/4445558.htm
The discussion appeared many months before Google announced a disavow tool, so theoretically you should have an easier time of it. That said, Google was on record as particularly disliking the hidden links in sponsored themes, so you've got to make it clear in any subsequent communications that you're not continuing the approach.
As you describe the disavow process...
People are saying the only way is to actually put in a effort detailing all your pain and suffering (e.g. contacting all the webmasters to remove the link and detailing that effort). It seems Google wants to teach webmasters a lesson,
I agree that Google has said as much, but it doesn't sound to me like they're being unreasonable in their expectations. Google's John Mueller gave the following responses in a live Google Hangout, answering some questions about disavow from a group of SEOs, including Jim Boykin (whose company owns WebmasterWorld).
The transcript of the discussion, posted by Jim on the Ninjas Blog, has some of the clearest exchanges I've seen on what Google is expecting.... John Mueller and Jim talk Disavows Ė The lost transcripts - Part 2 (of 2)
Posted by Jim Boykin
28 August 2013 http://www.internetmarketingninjas.com/blog/google/john-mueller-disavow-links/
[internetmarketingninjas.com] John Mueller, with my emphasis added...
In general what the webspam team wants to see is that youíre spending a reasonable amount of effort to actually clean up these problems. And for that they donít need like a Cc of every email that youíve ever sent out, itís kind of enough to see that you have this list of sites that you contacted, some of them responded, some of them didnít respond, some of them responded positively and made a chance, some of them might not have made a change and having that information in a spreadsheet, for example, is very useful...
...They just want to see that youíre really spending a significant amount of time to clean up this problem so that they can kind of be sure that youíre not going to turn around and do it again.
If more sites continue to use your themes from years back, IMO you may have to make some extreme efforts to remove those themes from circulation. I would incorporate this interaction into the list of sites you send, so Google can get the whole story in one place.
Resist the temptation to get angry or frustrated or overly elaborate in your own summary. Instead, make it easy for Google to understand, in one document, what is going on. Definitely adhere to the syntax they suggest.
The situation suggests that you may need to continue to stay on top of all the sites that launch with your linked themes and to routinely disavow them. It's clear that Google needs a list of urls, as opposed, say, to a description of what your theme looks like. It's going to be up to you, I assume, to track these and periodically send them to Google.
As far as recovery, that IMO completely depends on what else the site has going for it. When you remove a bunch of links that had supported the site for years, you need to expect a drop. How much of a drop depends on how much you depended on these links. What you need to do is to considerably enhance your content and to publicize it, so you've got something to help move your rankings back up. Google will be watching for any artificial boosts, so you'll need to use all legitimate promotion, and probably to improve your content as well to attract natural inbounds.