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@darrenspeed, when you listed the factors where #2 dominates #1, you didn't mention anything about on-page content. Consider this scenario:

Google actually jumps the current #2 to the #1 spot, but Google also notices that well over half the people that visit the site go back to Google within 20 seconds and perform the exact same search. This would signal to Google that the page's content doesn't fully satisfy its users. So it goes back to putting the other page on top, and notices that only 25% of the visitors go back and perform another search for the same keyword. Therefore Google waves it's magic wand and says, "yea, verily I declare #1 to be better than #2."

Other than the domain age, it is the only other plausible explanation I can come up with. Compare the content of both pages and get back to us. I'll be interested to see if it is a domain age issue, content issue, or possibly something else.

I ran into a similar situation with an inland warehouse client that wanted to rank for major port names + the keyword "warehouse." Instead of having a page for each port and regurgitating the same content from the home page, we decided to create content around the different ports that gave information about how storing goods at an inland warehouse ment it would be safer from severe weather. Then we also gave an overview of the port and the types of goods it shipped out and received, the types of cranes available, if it was a foreign trade zone, etc.

The point is, you have to find a reason to create content that is valuable to a reader and not just a keyword spamming search engine magnet. Feature a photo that is unique for each city and, depending on the type of business it is, give a good description about how your business is capable of meeting the unique needs of businesses or residents of those cities. If it is important or relavent, provide your estimated response time for each city.

Only you know your client's type of business, but hopefully you can take something I've shared and run with it. It certainly has worked for me in the past.

There was a similar question asked a few days ago. Not sure it directly corresponds to your situation but it is worth a read: http://www.seomoz.org/q/purchased-new-site-with-good-serp-ranks-do-i-operate-and-build-links-or-redirect-the-tld

To summarize: there is no easy answer and it requires careful analysis of both websites.

I agree with Kevin and Josh in that you need a separate page for each type of legal service. The only thing I can add to this conversation is that I know from first hand experience that doing a legal advice forum is probably going to be a non-starter. I've had a handful of legal clients and the last thing they want to do is to provide legal advice on their website. In fact, all your web copy will usually have to be reviewed by them to make sure their site is not providing legal advice, so don't go changing their copy willy-nilly - always suggest changes and get them to review it first.

Most legal keywords are going to be fairly competitive, but if you add your client's location to those keywords, e.g. Cityname Bankruptcy Lawyer, then you will reduce your competition considerably. In my hometown the person that ranks #3 for one of these types of keywords scores a D on their on-page optimization and only has one keyword-rich link from an external website. Of course the larger your metropolitan area the more competition you will have.

If it is possible to match the page names then do so. As for the content, I wouldn't have an issue with adding all of your new content at once. Your meta description tags won't have a direct affect on your rankings so you can change those if you'd like, or you can leave them the same. As for your meta keywords tag, I don't use it. It doesn't affect you search rankings and, in my opinion, only helps your competitors figure out which keywords you are targeting.

I can't tell you if the link building campaign will be easier or not with the supplied information. I guess it depends on how easy it is to claim the listings. Can you log in and do it yourself? If so, does anyone still have the log in credentials? Do the directories seem to be actively maintained? What if you have to email the web master and they don't respond? I would not bank on getting all the directories updated with the correct information.

There may be some benefit to hosting on a different C-block server. I think seohosting.com sort of automates that process for you. I'd be really interested to see how big of a difference it made. For instance, if you set up hosting on the same server for a few months and moved it to a different one.

I'm wondering if doing a permanent redirect from your old domain to your new would be the thing to do? Hopefully someone else can jump in here and add their expertise as I've never tried this. I do not think the penalty would transfer to the new domain but neither would all the link juice from the old domain, which really isn't doing anything currently since you are being penalized.

I have a client whose old SEO company ended up getting them penalized. We have not filed a reconsideration request since we are only 48% of the way going through the spammy backlinks and asking for them to be removed. Most webmasters aren't responding but some are and I have noticed our rankings increase considerably even though no reconsideration request has been filed. Have you tried going through ask asking for all the spammy links to be removed? If not then that may be why they have not removed the penalty.