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Thus lets list the penalties we know exist:
1. PR2 with no backlinks
2. PR0.
3. Grey (No matter what you hear, I guarantee you this is a penalty that exists for a fact.
Your options for repair:
1. Throw out domain, start again.
2. Disallow googlebot, hope in 2 months if you let it back, it will let you back.
3. Ask googleguy specifically about your site here, hope he has pity on you.
Anyone have anything that should be added to this list?
One other possibility. It occurs to me if this site has over 500 inbound links, it probably has a lot of outbound links too. While it is easy for someone like me that links to only 3 sites run by others to check them over thoroughly to see if they look squeaky clean, this would seem a monumental challenge for a site with a ton of outbound links. Any chance this site was tricked into linking to a bad neighborhood? Or, is it possible that this site has old links it doesn't check, which while long ago they were A-OK, have since been taken over by someone running a link farm?
Since unless this is a Google bug it has to be a penalty, this site should try and figure out what caused it. Unless, of course they were shady and know exactly what they did.
To summarize, if we received a penalty, it is quite unfair as we've done absolutely nothing to warrant one. I'm hoping the PR2 with no inbound links indicates something other than a penalty, but I'm not keeping my hopes up.
Somebody please correct me if I am wrong, but isn't it normal with the link: command not to show links if they are below a PR of 3? kgormat, have you checked the PR of the sites that link to you? It is possible that they have dropped in PR, and this is why you don't see them with the link: command. The fact you used to be PR2, and are still PR2, doesn't really suggest a penalty. Now if you went from PR6 to PR2, THEN I'd say worry.