We were seeing a significant drop in Google (organic) traffic for Server Fault after instituting this "follow links if enough upvotes post-edit or post-create" policy.
We traced it back to what we currently think are a string of posts on Server Fault that got nofollow removed through "trust", but were being interpreted by Google as link farms or spammy pages.
So it appears that they do remove rel=nofollow from reputable links, although their threshold for reputable appears to be very high.
When the sites that informed various well regarded answers on the sites get their due, their search engine rank rises. With such a well ranked site now pointing towards them, they rise in the results, often higher than the SO answer referencing it.
As a secondary issue, there's a relatively common black-hat-seo practice of buying a well regarded domain, and soaking that links for all they're worth to promote something. Their switch-flipping may have run afoul of systems designed to mitigate that.
So not sure how this made it to the front page of HN. Not surprised the author doesn't address the response.