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Dont really have any context as to the timeline of this, and the other lines in the graph.  Just by looking at the green lines though, it looks like normal ranking fluctuations.  1-2 spots randomly here and there arent that big of a deal.  Sometimes its actually a good sign.  I have seen in the past that when the fluctuations start happening, Google is trying to find out where you will land in the mix again.

With some good link building, new and fresh content, you should be able to get back within a couple months.  But you should do something.... if you dont change anything, dont expect Google to change anything either

You would treat your sub category page the same as any other content page in this case.  SO with schema you would combine a couple of their example schemas.  I havent done it yet for sub-categories, but i was planning on using elements from both:

http://schema.org/SearchResultsPage  and http://schema.org/CollectionPage

The nice part about schema it that you dont need to lock yourself into one of their pre-defined categories, moreso than it is the combination of tags together that interpret the page.

Its not a bad idea in the robots.txt, but unless you are 100% confidant that you wont block something that you really want, i would consider just handling unwanted parameters and pages through the new Google Webmaster url handling toolset.   that way you have more control over which ones do and dont get blocked.

I honestly dont think you would get that much more incremental benefit from just removing the "services" portion of the url.  I wouldnt change whats there (even getting rid of the services page) unless you have a really good reason to.  Why not still keep the seo and design under a services page, and then create an internet marketing page that lives off of the services page that  houses all your other services?

SEOmoz has a decent one.  Its a bit out of date, but its worth going through:  http://www.seomoz.org/directories

There are some specific technology ones in there, plus most of them will have that category.

There isnt really any specific documentation on how much pagerank is passed in certain situations.  Historically this technique is call pagerank sculpting, and the direct pagerank passed value is being de-emphasized as of late.

Here was an answer about a similar issue posted by Rand and the SEOmoz team a while ago: http://www.seomoz.org/qa/view/15353/internal-links-and-page-rank

The value comes in with a large volume of those "tiny" keywords.  Structure you r site so a lot of the tiny ones link to your homepage to keep the homepage ranking well, but only link off of your homepage to a handful of important pages (like if you had a page for each of those 5 or 6 good keywords).

We actually have our own custom solution, so I cant really speak to the shopping cart software. We didnt want the hassle of trying to figure out how to customize our own carts and dealing with 3rd part solutions that are sub-par.

Edit:  One things we are experimenting with is actually have a "Book Now" button, but that still pops a lead form.  Here is an example on one of our sites:

http://www.vacationroost.com/baja-california-sur/cabo-san-lucas/details-p336778.aspx

i will say i dont like this lead form much, but that a whole different project

My company does something similar.  We sell vacation rentals, and some of those rentals are super luxury product that cant be purchase online.  Here is what i suggest you do:

1. Keep all of your products in the same website, under different folders.  That is the best for SEO purposes and easier to handle from a technical standpoint
2. For the products that you cant purchase online, use the product page as a lead generation opportunity.  The call to action goes to a lead form, rather than a shopping cart or billing page.  You can experiment with what kind of call to action button works the best.  In our experience, the high dollar transactions wouldnt happen online anyway, so people actually expect a contact form or phone call of sorts.  I would make sure the lead form has a clear way to either email you or call you.

If you have more questions, i am happy to answer since we do exactly the same thing.

Can you redirect those pages to some relevant category pages on the site?  The 301 may help in this situation.   Ideally you need to find out where the internal links are a eliminate them.

The 4xx errors arent the worst, and those pages should get de-indexed eventually.  Also make sure the xml sitemap it updated with the proper urls and those old ones arent in there anymore.

There isnt a perfect ratio, but for larger sites it is very important to get a large number of backlinks to internal pages.  It helps with the overall "Domain Authority".  If your site is structured well, then the "seo sculpting" internally will help boost the homepage.  You should make sure to utilize internal links back to the homepage or important high-level pages.

For instance, lets say you have 10 backlinks.  If they all go to your homepage, your homepage could have a nice SEO value with a pagerank of 5.  But your interior pages dont have much pagerank or seo value, and therefor the rest of your site doesnt get ranked well.

In contrast, lets say 8 out of the 10 links go to internal pages, and those internal pages all have a small pagerank, and those pages all link back to your homepage with important keywords, it will pass a bunch of that seo value up to your homepage at the same time of increasing the value of your internal pages.  Its a better way to get your whole site ranking, rather than just homepage.

I also think it needs to be more like the first example.  The SE are trying to move towards a more natural language recognition, and i would write in that manner.  Remember too that you can utilize punctuation to split keywords up.  For example:

"Many buyers prefer plastic widgets or paper widgets. Steel and brass widget are increasingly popular..."  This would still hit all the keywords without seeming too spammy.  Notice that the period here grammatically give a break to your content, but google will see the "widgets. Steel" together sometime, ignore the period and recognize it as "widgets steel", and then interpret that as the same as "steel widgets".

Just another small copy writing trick.

I second this opinion.  folders are the best way to go here.

I like the rel author option in this case.  It doesnt really take care of the indexing issues, but I lean toward not worrying about it.  In some cases, i let Google figure out which one they want to index given the two.  They will probably choose the original posting, but if you get comments and discussion, I can see that bubbling to the top.  Its more like news sites or aggregators at that point.

If its just for your users, and its helpful, go ahead and just post the article.  Its technically duplicate content, but google has already determined that the article site had the original content up first, and yours may or may not get indexed ever.  But you should care.

If you are looking at the SEO implications, thats a whole different reason.  I hope you have a link in that article to your site, since you published it.  If so, you would actually benefit more from the link value from the other site.  If you boost the value of that blog article on the other site, and it has a link to you, that would hold more SEO value down the road then trying to figure out how to get around the dupliate content issue here.

Russ is right on.  you need to ping.  I would also do a bit of marketing to get the blog seen in the blogosphere:

1. Manually submit your blog to google blog search.  http://blogsearch.google.com/ping.  Also submit to technorati and other blog directories.

2. Make sure you have an RSS or Atom feed service.

3. Get on a couple of blog rolls.  This doesn have to be "high PR" type of link building, just some incoming links to help google index and identify your blog.

4. Blog Sitemap to Webmaster Tools.  This will also assist in the process.

I second all the comments below.  That should give you enough professional consensus in this arena to head in the right direction.   Redirect with teh keywords, and this will have the best long-term results.

As for Google parsing keywords out of urls or anything else...  You will need to remember that for the most part google ignores special characters and parameters in both content and urls.  It doesnt matter if the url is in a link or the actual url bar up top, google will treat it the same.  Google knows its a url string, and applies its "url parsing logic" to it.  So it only makes sense that a full url link would be parsed, just the same way your website url is parsed because it includes the keywords.   Its the same logic.

Either way, it will be tough to go that route and still get indexed.  Its a pagination issue that everyone would like a solution to, but there just isnt one.  It wont hurt you to do this, but wont ultimately get all those pages indexed like you want.

Disagree. I think you are missing out big time here- category pages are the bread and butter for eCommerce sites.   Search engines have confirmed that these pages are of high value for users, and it gets you a chance to have optimized static content on a page that also shows product results.  All the major e retailers heavily rely on these pages (Amazon, ebay, zappos, etc...)

Option A doesnt do anything for you. I think the search engines flag duplicated title tags, even with different products on the page.

I agree with Gabriel.  Good for both reasons, especially search engines.  They will read those characters much better.  Example? Just look at the url for this forum post.