Don't know about Google cracking down on link wheels as all of my link wheels are working perfectly, and ranking well in SERPS.
I try not to leave footprints or a pattern that can lead to me, and I use as much properties as possible in my link wheels with the purpose of totally dominating my niches.

There have been a couple of good threads on this subject in the last couple of weeks. Forum search is your friend!

I've heard of people getting penalized for having them, but i don't think there's any solid evidence, at least that I've seen.

Your best bet would be just to have one-way backlinks from high PR sites, rather than bother with link wheels.

There is absolutely zero penalty or else I'll do it to all of my competitors. If a search engine finds a link wheel most likely they will identify the sites and give zero link juice for the sites links.

There is NO penalty issued by google for linkwheels.

I personally believe this penalty thing is a Myth. In the last few months, I have done several hundreds of linkwheels campaigns and the only thing I have received till this moment as i write is Great Results. I have tested, tweaked and done wheels in a several different manner that I am convinced that Linkwheels do work and work well.
The very good thing I like about linkwheel is that it doesnt take so long before you begin to see results. Even if you competition is hectic, all I usually do is flush up the wheel links with a little bit of High Authority links and I am all good.

Hope this helps

Here's a link that is different from your average link wheel: http://lemonarian.com/images/advancedlinkwheel.png

I have tried to look at this from a logical point of view, as I really have no expertise on this. But from that point of view, this myth is one of the dumbest things I have ever heard of.

One of the corner stones of site authority or rank is the back link. The higher the PR of a site, the more a back link on that site is worth. Web 2.0 sites are typically higher rank sites, and thus have more link juice to flow to the site that a link points to.

The only thing I might agree with is that the linkwheel needs to not be symmetrical. It is better if there is a little chaos to it, other wise it looks like it is not natural. And you know that Google prefers natural. But other than that, this linkwheel myth is pure bs as far as I can tell.