I rolled over a 401K into another plan (stocks & bonds), because I changed jobs. Last year I had to withdraw all of it due to financial problems. I had surgery and had medical expenses to pay, house pymts, and separated from my husband. My medical bills did not exceed the 7.5% of my annual income. I paid taxes on my withdrawal, but will I still be penalized the 10% fee?

Yes, you will pay 10% Early withdrawal penalty unless you qualify for the exceptions. Your medical expenses don't qualify as exception.
You may qualify under: A divorce-driven 401K distribution is QDRO (Qualified Domestic Relations Order), which qualifies as an exception to the 10% Early Withdrawal Penalty.

Refer to IRS Publication 575, Pension and Annuity Income.
Internal Revenue Service (http://www.irs.gov)