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Nevermind I figured it out. The report is showing as banned but they are blocked by my robot.txt file.

From my experience with this latest update (not even 24 hours old, mind you) it seems to be more of the latter than the former. I'm seeing sites that had a mix of good/poison links sit around the same placement while sites with nothing but spam links dropped off the face of the earth. Again though, this is early and one teeny tiny little example out of the billions of pages out there.

If some of those pages have some good external links pointing at them, I'd take the time to redirect those.  If they don't have much in the way of links, then I probably wouldn't bother.  Also, do you need to link them to specific new pages?  If they're mostly similar, and are generated in some consistent way, you could mass redirect them to one or more of your newer pages?

Does Google know that we own both of them? Google is a domain registrar and can probably see the registrants.  How much they use this is unknown.