The real question is exactly what is a "relevant site" ? Is it a site that is in the exact same nice as yours or is it a site that your visitors might appreciate having a link to ?
I personally find all the restrictions that Google dictates to webmasters are getting a little ridiculous and people aren't building sites for people, they're building them for search engines which is the precise opposite of what Google thinks they're forcing people to do.
Also, depending on your site's nich there could be thousands of relevant niches or only a few so it doesn't make ssense to me if for example, my friend has a video gaming site and wants to link to my music lyrics site or my linux, why it shoulf be technically irrelevant?
As far as linking to "bad neighborhoods" such as casinos or pharmaceuticals, just go search Google and they've been the biggest propietors of links to those "bad neighborhoods".
I wish webmasters would forget about all this SEO stuff and just build sites for human beings and not machines.
