[jsm386]

To paraphrase what b1twise wrote below I would say do not do as Google says when common sense, lots and lots of case studies, and practitioner consensus say otherwise.

Sure...you can move it to a subdomain and if all goes well, great. If not you can cite a Matt Cutts video to say who could have known: https://www.youtube.com/watch?v=_MswMYk05tk

If the organic traffic matters then trust people who are actually affected (http://moz.com/community/q/moz-s-official-stance-on-subdomai...) and figure out another (yes, much more involved) way to deal like reverse proxying if you have other demands to contend with.