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There was a Google Pengiun update yesterday called Pengiun 2.0. A ton of websites were penalized and lost rankings. I saw this this morning with a few of my sites as well. Give it a week or so for Google to adjust to the new algorithm changes before making any extreme moves. More info on the algorithm change on Matt Cutt's blog here http://www.mattcutts.com/blog/penguin-2-0-rolled-out-today/

I agree with Andie, subdomains are basically new websites. They carry NO value because they are in a new folder, not a subfolder. If you want to make your URLs prettier, check to see if there is a plugin for the software you use to simplify the process. If you have only a couple hundred products, I would go old school and stay away from plugins.

Hello Miguel, As long as you don't stuff this keywords too much in your page it's okay. Basically, after Penguin 2 update there isn't a priority for more pages with a high density of keyword stuffing. You have to focus more on quality and unique content. Hope it helps!

Dr. Pete wrote a great post regarding that warning and the meaning behind it, and when to pay attention and when it can be ignored. http://www.seomoz.org/blog/how-many-links-is-too-many