It looks like the changes you're seeing here may be from an algorithmic change. As part of our recent algorithmic changes (which the outside world sometimes refers to as the "May Day update" because it happened primarily in May), our algorithms are assessing the site differently.
This is a ranking change, not any sort of manual spam penalty. You can hear more about this change in Matt's video at http://www.youtube.com/watch?v=WJ6CtBmaIQM.
Working on making sure that your site is of a high-quality and has unique and compelling content is certainly a good idea, and something I would always recommend working on, regardless of the site's current standing.
I don't know if this is the first time a Googler cited MayDay as the reason behind a particular site not ranking well, but it is always interesting to see this.
Of course, this May Day response isn't all that helpful for all webmasters. The webmaster replied:
I have been working like mad on the site, writing lots of new unique content and getting rid of the bulk of the duplicate content, I have noticed a few pages appearing today, I really hope that this is the start of things returning to normal for us, as I am sure you can appreciate this has had a devastating affect on our business.
I have been working up until 11.00 most evenings adding informative text to each page and I now think that nearly every page on my site has unique content. I submitted a reconsideration request and heard back to say that this had been processed, I have also had the DNS errors fixed.
With this, time and constant content and linking is the solution. So there is really no quick fix.
Forum discussion at Google Webmaster Help.