Q3: I want to get rid of the link profile, all links were low quality (non-relevant free directory submissions, bookmarks, spun articles, etc) and limited tired link building GSA). The domain has PR 0 after the recent update

and only two links have PR on them (PR 1 and PR2). I judged this as a link profile to run from and start from a clean slate. Do you think once the partial match domain was removed, my sites tolerance to exact anchor text would increase and I can 301 the old domain to new domain or do I still run a risk of getting penalized again for keywords in anchor text?
If you didn't get a notice in webmaster tools about "unnatural backlinks", I wouldn't suggest disavowing any links. If you have a problem with too many exact anchors, its far better just to balance them out with more links of nonexact anchors.
As far as how to redirect it ... does it still get traffic? If so ... set the whole site up as a canonical to your new site. This transfers rankings quickly from one domain to another. 301 would also transfer the links that you say you don't want.
The reason I hate to disavow links is that, while Google can somewhat alleviate the penalty caused by it ... that penalty seems to snap back pretty easy. Far better just to balance the links out.
Issue: High bounce rate.
Resolution: Added a widget to the sidebar (across full site, promoting my top articles). The links are image links, so no anchor, are site-wide. This to me seemed similar to the way you promote stores, by adding links in the sidebar. I would want to rank for all those pages I am linking to from the side bar, so I am concerned about having an anchor text in the link. With limited traffic now (only from bing and yahoo) the bounce rate reduced from 85% to 60%. Q1: Do you think not adding anchor text with keyword was the right move? I am getting a good reduction in bounce rate by this and don't want to mess-up keyword density by having overly optimized anchor text.
I hate most widgets just because they seem to elevate keyword density throughout the site. Be careful of the keywords they happen to inject on every page ... it makes it harder to use those same keywords in content without hitting the limit on density.
You're best off if you can use your own anchors on all the links and tone down repetition of your site's primary keywords.
Which page is better in your view? From the user standpoint I was giving all the information on one page and was also hitting 300+ words, now I have much smaller word count, the page does not look as good, and is no longer as useful but has no duplicate content. One solution is to add unique descriptions to each page (which may all convey the same thing but written very differently). Do you see this as the only solution or do you think 150 word pages have a chance to rank?
Almost every update that resulted in bad rankings for someone was primarily a strict keyword stuffing filter which just got a little more strict. 150 words isn't very much content ... you can rank with low content + lots of links but its hard to rank on just low content. I'd recommend taking like 5 of those, improving them by bringing them back up to 300 or more words, and keep adjusting it like that until they rank.
Sometimes, I don't even know what Google is looking for ... if usually I can get a page to rank following the guidelines I listed, but worst case scenario I will just tinker by adjusting keyword densities, adding content ... keep doing that until the page ranks.
Q: I am also moving these posts to pages as that will further improve the structure of my site (I will use blog post to promote those pages)
Q: I have several topics such has "how to make lightweight bike parts" "How to install lightweight bike parts" where I actually want to target a five to six word keyword!. I typically write a 5000- 700 word article for them. Can you give me keyword density suggestion for this.
On a 5/6 word keyword its easy to stuff. You'll want to use the keyword once, and you will have to write a longer article. Use portions of the long keyword as well (break it down into chunks) and keep those chunks at their appropriate keyword densities as well.
For this ...
"how to make lightweight bike parts"
I would have this in title, and as such my template will also make it a H1 tag. I will use it in content at 1% or less. Because it is a 6 word keyword, that means you have to write more than 600 words minimum to get 1% density on this one keyword.
I'll break it up ... "If you're wondering how to make a bike that blah blah", (just used "how to make" again) ... I'd do that to 1% density on its own, seeing its a 3 word combo.
"Lightweight bike parts are important if you are building a bike that will blah blah" ... just used "lightweight bike parts" as another keyword on the page. Because its 3 word combo, I'd use that at 1% or less.
I'd use "how to" at up to 1.5% density, lightweight up to 2% density, "bike parts" at up to 1.5% density, bike and parts separately at 2%.
1.6% density is bordering overoptimization on a 2 word keyword ... I'd keep it lower.