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Adding nofollow tags to listings, where submitters have put up valid links to the LL is wrong, IMHO. If you put up nofollow tags, let submitters know before you do, so they can put a nofollow tag on your recip.
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Ok, I agree with that.
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If the domains are bringing in money, leave them and don't link to them from your other sites on your network. That would spare you from any real or perceived Google wrath.
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You missed the point of the article spacemanspiff linked to:
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Matt Cutts had accepted an invitation to participate in an open review of web sites, and had done a whois lookup on a publisher as part of that process. While examining the web site presented for review, Matt commented on “other domains” that publisher held, as if it were somehow germaine to the discussion of the particular domain under examination. The webmaster stated his “other domains” were unrelated, and not even linked to the domain under review. Matt acted as if that was irrelevant. Several SEOs in the audience were offended. What did other unconnected domains have to do with the one, published domain under review?
Matt didn’t clarify, but it was obvious to me and others that Matt was seeking to impart intent upon the publisher. The “other domains” were considered clues… additional information about the character of the web publisher.
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Now, I'm not sure this depth of analysis happens algorithmically, and I wouldn't kill a money-making domain based on just one article. But it would make no sense for Matt Cutts to draw conclusions about what Google's algos were doing by going to lengths the algoes never bothered to go.
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I am wondering does Google notice the link to you is a nofollow tag and then possibly fault you a little being the link that has the nofollow tag?
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No. Nofollow just means I don't vouch for that link. Its a signal of intent, not site quality. To put it in really simplistic terms, if I nofollow a link to cnn, for example, it doesn't mean cnn is a bad site. It means that I do not want the link to boost cnn's search engine ranking.