"Would this be considered a paid link? Where is the line drawn?"

... is it stating the obvious to suggest that whenever PageRank is mentioned in a link request the requestee has probably just breached Google's Mendoza Line ( http://en.wikipedia.org/wiki/Mendoza_Line ) ?

I have a feeling these folks are going to get slapped down pretty soon...seriously, if you have a domain that's worth at least 4 figures, you shouldn't pull stupid stuff like this.

I smell a penalty coming.

I bet your sense of smell is wrong. I think they are too big to be penalized. :)

I doubt Google would have a problem with this so long as they don't try to implement this on a really large scale. Or unless Matt is really bored one weekend ;-)