In short, the content contained in iframes will not be indexed. It's a really bad idea from a SEO perspective. I use iframes when I intentionally am trying to keep certain content from being indexed.

Do not request for Google to remove the URL. It would mean the page would be de-indexed for 90 days.

The cleanup will depend on the root cause. If there is an issue on the site right now then you cannot resolve the problem until it is fixed. Report the issue to your host and ask they run a security scan. Meanwhile run your own scans and upgrade the site to 1.7. Change all passwords then check the site again.

A search of your site shows this issue is more widespread then the one link. Perform a Google search for "viagra insite:planetherbs.com"

I have seen this issue before and my recommendation to resolve it asap in Google is to add the canonical tag to your pages.

As to how this happened, you can review server logs in an attempt to gather more information but I would recommend taking all steps possible to secure your server. I am not a security expert nor a Joomla expert but I notice you are using Joomla 1.5 as a CMS. Joomla 1.7 was just released and addresses numerous security issues.

There are a few other SEOs who have more experience with Joomla then myself who can offer more details. In general, upgrade your software then do a basic security check of your site. There are many Joomla guides online for this, but here is one of them: http://docs.joomla.org/Security_Checklist_7

Jay, you are asking a great question and the answer is yes, links that are offered from URL shortener services build DA.

Think of those links as 301s. When you use http://bit.ly/xyz that URL is 301'd to the actual web address. As with all 301s, you do lose a bit of link juice due to the 301, but 90%+ of the value will remain.