Kgun: I understand what you are saying but that is once again, nether here nor there. The original question was "Can inbound links really hurt you?"
The answer is yes, they can. Whether the site in question was completely zeroed out, or was penalized in a negative manner does not matter. What matters is simply that they lost all rankings, were not allowed to show publicly, lost all
PR. Does any/all of those hurt a site? Yes.