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Hi

I'm in a similar position to you and have been trying to get my site back since about Sept 2012. Over the last 4 weeks, I've been through the process of requesting link removal of low quality links using the RemoveEm.com tool. I now have a report detailing sites I've contacted, how many times and whether the link has been removed. My site has lost rankings rather than being completely dropped from the SERPs so I may need to use the disavow tool rather than just do a re-index.

So my answer would be,

1. Try removing poor quality links yourself first and perhaps use a tool to help do this www.removeem.com. Then use the disavow tool
2. A natural policy going forward has not helped my site.
See http://moz.com/community/q/is-there-anyway-to-recover-my-site-s-rankings

I don't know if removing bad links will work for me or not as I've only just completed the process. I now plan on using the disavow tool to remove the links I didn't get removed by my own efforts.

The removeem.com tool did help me identify potentially harmful links. It's a tedious task so using a tool like Removeem over Site Explorer and manual removal requests was the way I chose to go.