A WebmasterWorld thread has early discussion on the topic of what to do about a penalized site. Should the webmaster destroy the domain and start on a new one or should he/she clean up the site and wait for Google to reinclude the site in the index? There are pros and cons to both avenues.
It totally depends on how bad your penalty is and what you did to warrant it. It depends on how new or old the site that got penalized is. It depends on how many quality links and trust you earned on the old site. Is it a throw away domain?
In most cases, I would say that it is best to clean up the penalized site, as opposed to starting new. But what do you think? Take our poll:
Forum discussion at WebmasterWorld.