Google Penguin Just Devaluation of Links?

I am no expert... but I just want to explain my situation.

I had a site that ranked for many terms before April 24th. It ranked for years and ranked for many many terms.

Then it lost rank for many of its main terms, most lost 5-20 positions.. and for long tails, much further...

For the last month, I've been thinking that its been overoptimized and had too much of the same inbound anchor text, causing a penalty. So I hired someone to help me build links that said generic terms (click here, etc.) and brand domain terms, ie: domain.com as anchor.

Anyway --- when it all hit the fan, I went to Open Site Explorer, joined and submitted my site to LinkDetective.com. I waited literally a month as this site (linkdetective) has been clogged up by everyone freaking out over Penguin.

But today, they sent me my results.

I am now seeing that my most coveted keyword - the one I valued the most - actually was used the most, (8% of the time) .. However, of all my links, the links with this as an anchor have also been considered "dead" the most.

So let me summarize that again --- my most coveted term was indeed used the most, but only 8% of the time... and now, after much of it has died off, its actually used LESS than other terms.

So -- what I was thinking originally was that this term was used TOO MUCH as an anchor and I was suffering a penalty -- but now I actually think that it was never use too much, but was just on many sites that Penguin may have considered crappy and deindexed/i, or maybe the hosts just ditched my links?

I really have no idea how the links died.. I hired most of my linking out ...

So now I am thinking of NOT diluting my links and instead going the opposite route as I originally planned . instead of diluting -- maybe I start to build quality links with my coveted anchor text?

(I also think that, due to many links losing their value, that also made my main domain lose some of its authority, and therefore, that is why its not ranking as well for long tails? )