I posted this question on Google webmaster forums asking for their help to decide what should I do ( I posted the question on the 28th I think so the Panda 3.4 update was already rolled out and I saw an increase in rankings)
Since Google said they will penalize the over optimized sites, I decided to take their opinion on this issue, i will be using the keyword "phone" as an example
My site has a menu on the left side, the anchor text in the menu items are blackberry phone , samsung phone, htc phone, apple phone...etc
I have like 80 items in the menu and each one has the word phone in the anchor text, now each one has a link back to website/keyword-phone , like website/blackberry-phone .. etc..
The admins there and the experienced people messaged back and they were like that is keyword stuffing, and u r disrespecting ur users intelligence..blah blah.. so I decided to remove the keyword "phone", when I check the keyword density using the tool, it shows that its 24% for the keyword "phone"...
Now I was ranking at page#2 for a keyword like "phone reviews" the moment I removed the "phone" keyword from the submenu items my site went back to the 8th page lol so what the hell? Google liked my keyword density when I had it but the moment that I removed it, they pushed me back..
It's funny how those "Experienced people" and Google claims BS about stuff and ask u to follow what they say and when u do , u get screwed lol