Dave might know better than me, but I would think as long as you're not linking back out you're probably ok. I think other than extreme cases that recip linking practice most likely didn't result in a penalty. Might depend a little though on how many recip links we're talking about and the sites in question.
There's nothing inherently wrong with exchanging links with another site. If I sell tires and you sell rims it makes sense for our sites to link to each other. The issue is more when you're linking back and forth to a bunch of random sites solely for the purpose of manipulating search results. Naturally search engines don't want to see that.
I think in most instances the links are just discounted, though they may hurt a little, but I think in most cases this hasn't been a penalty things. I believe some sites have been penalized so it may depend on your situation.
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