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Each page will have 2-300 words of content in the body section ... which may or may not mention the key phrase. The navigation links belong there for the user ... but they don't necessarily all have to say "Blue Widget" somewhere in them. Am I overusing my phrase, and likely to be penalized?
Thanks for the help on this one.
Now that I've got that off my chest...
Link text is very important and how many occurrences you have on a page is up to what you know about your visitors, your site design and other on-page factors such as overall keyword density.
The point that would concern me is...
2-300 words of content in the body section ... which may or may not mention the key phrase
In general Google and other SEs really do like to see the keywords in the text. If possible try to include your keyword phrase in an H1, at the beginning of a paragraph, the middle of the page, end of the page, blah, blah...also try to scatter a few supporting or secondary keywords and plurals if applicable.