Trading with penalized sites??

[Flower]

I think linking to penalized sites, can affect you, yes.
http://www.google.com/support/webmas...y?answer=35769
"In particular, avoid links to web spammers or "bad neighborhoods" on the web, as your own ranking may be affected adversely by those links."
I also don't think that if any penalized or banned site links to you, this can affect you, as you have no control on it, so nothing that doesn't go from your url can affect you, otherwise it would be easy for anyone with a banned domain to put you down by linking to you ...

[Linkster]

The biggest problem you face is that there is no tool out there that really reflects accurately the Google PR - the toolbar is known to be faked and has been for two years, any smart webmaster knows how to get fake PR for a domain using 302s and so far no one else has been able to hack Google well enough to get into their real PR database

Im glad you decided that PR is not a good indicator of trade worthiness - something Ive been preaching for years as has at least one other LL owner here.

One indicator you can usually trust is Googles Directory (if the site is listed there) as they tend to update that quarterly with a good indicator of the pages ranking and it also means that the page is listed in DMOZ(for what thats worth)

Overall - looking at a site and its history using domaintools (the new whois.sc) and what type of linking they do - as well as the most important part - does the site add any value to your surfers? - is the best approach

Take a look also at whether the site has any history of being listed consistently in Googles SERPs over time - dont use a one day snapshot as its really too easy to play for a few weeks and then drop completely.