Legitimate outbound links to a bad neighborhood killed my directory site

Hello.

I've recently set up a site that is intended to be a directory of adult escorts in my city. When I set it up originally it had no links, just some text content and a few occurrences of my main keywords, and I was doing reasonably well. Then I went out and hunted down links to local escort websites. My goal is a free listing of current escorts (most directories are filled with dead links).

As soon as I added these free (not paid) links to legitimate escort sites (which may or may not have link pages on which I do not want to be listed) my site dropped out of search results.

I understand the concept of bad neighborhoods, but I also understand that a directory site containing links that are not paid for (and have rel="nofollow" attributes set) is genuinely valuable content, which is why I was getting plenty of natural traffic before my site actually did what it advertised (contained links). There is nothing black hat about this. No sneakiness, but I am still being penalized. Is google forcing me to remove all the links and instruct my visitors to copy and paste the URL's? What kind of web is Google creating if I can't put up a resource like this?