In July 2006 I left my place of employment and had to cash out my 401K, paying significant taxes and penalties on 2 loans that became taxable income because I had no choice but to default on them at the time. I returned to the same company in December of 2006 and when I started up a new 401K, those defaulted loans were still on my account.
Unfortunately, I've now been laid off and need to decide what to do with my 401K. My question is, can I be taxed on those defaulted loans as taxable income AGAIN? I would think they could only do that to me once? I hope..

Contact the custodian of your 401K plan and get this issue resolved. If you already paid the taxes on the 401K loan default, by law you should NOT have to pay a second time.