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[edited by: encyclo at 7:04 pm (utc) on July 19, 2008]
[edit reason] moved from another location [/edit]
What's the best way to handle a request for unsolicited link exchanges?
You'll be getting lots of these and the best thing to do (IMO) is to ignore them. At most, check and see if it is a 'fair trade'. Right off you'll be flattered; in time you'll be sick of getting requests from sites that promise more than they deliver. For example, if you exchange links with a bunch of sites, those links won't necessarily help your site. Plus, the other site my drop their link to your site after a while. If you don't notice, then they get the full benefit of your possibly valuable one-way link to their site and you get nothing (which may be what is worth anyway). 99% of the time the site that wants your link is not worth linking to and not a site that you want to be associated with. Many links are not worth having; even detrimental. Straight link exchanges without the backing of context and content don't carry a lot of weight with with the SEs (IMO). Now, if someone wants to link to you, one-way, no strings - be gracious and let them. Return the link if you like - but it's worth a lot more if you don't. You might find an 'alternative' option to being 'grateful'.
Don't pay much attention to PR myself. PR1 is the dregs, but for most of what I do PR1 or PR7 is a lot less important than the relationship and synergy between the sites. One-way links to you are invaluable, especially if coming from a related, relevant, and respected site. Link swaps are a draw at best. I only exchange in specific cases and try to work the exchanges in content links; i.e., a link exchange is much more likely to be beneficial to both owners and both sets of users if included in a situation with actual content and context. Link pages and exchanges on those pages are pretty much bottom rung for my purposes. (No doubt you will be offered very differing opinion on one or more of these points, but the above notes work well for us.)