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Lots has been suggested about doc types needing to be spot on for SEO to work properly - but I've read (almost certainly here) about properly executed experiments by SEOers who've come to the conclusion that, from an SEO point of view, the doc type doesn't matter a jot ... Furthermore, in case you didn't know, neither Google nor Yahoo have a doc type declaration. Says it all for me. If you don't believe it, visit them and view source.
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Hmm . . . believe you . . . or believe Google Webmaster guidelines. What a choice!
Webmaster Help Center - Webmaster Guidelines
I quote; "Check for broken links and correct HTML."
emersonworldwide, I wouldn't stop your linkbuilding and other efforts, but you should start working through that site and bringing it into compliance.
For the record, pointing to humongous sites that are going to cost gazillions of dollars and take a year or two to deploy their upgrades to their sites, all of whom were waiting for the advent of IE7 before making that commitment is not the best argument to use to justify being lazy with a small site. In a year or two many of the larger sites out there will have codebases much closer to compliance than they are today.