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My question is: Now that Yahoo has removed the penalty and accepted my site in Search Submit Express will my site ever show up in the free organic SERPS?
You were lucky that your Sitematch application got approved. That tells me it was probably not an outright ban that many of us have experienced. If you are "banned", you won't be accepted into Sitematch. I don't think they even look at your site. They just steal the money that you paid for what you expect to be an honest chance at getting into Sitematch. Then they simply tell you that you are rejected AFTER they have your money. If you clean the site up more, and resubmit again, they will once again steal your money and reject the url thanks to their "blacklist" banning procedures.
So, at some point, you just accept the hand that Yahoo dealt you, and move on. There are two very big contenders out there: MSN and Google. Don't flatter Yahoo anymore than you absolutely have to. They aren't worth it and they know it. :)