Well looking at the base metrics its easy to see why this is perplexing as you have stronger PA, DA, Links etc.The only thing they have on you is more social media activity via tweets and FB shares.
Here is an awesome blog post by Seer Interactive on how you may deconstruct this:
http://www.seerinteractive.com/blog/how-are-they-beating-you-quick-seo-analysis-tools-part-1/2010/08/12/
Or you can use the new full report on the keyword difficulty tool by seomoz.
On a side note, one strategy you could employ would be to pick up the links for all of the domains that are linking to their 404 pages
If you check out their top pages in open site explorer you will see that they have a ton of 404's. Just see who is linking to those non-existent pages, contact them to let them know about it and offer your website as a replacement. This will do 2 things:
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Reduce their authority making it easier to catch up while at the same time:
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Increase yours (although your link profile is very strong)