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pankgarg
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First, I would call it a very good effort to explain an intricate concept. Although I may have some difference in what the passage says, still it is an excellent involvement and deserves a well-earned kudos.
However, a few things I would like to delve into:
Participles both present and past are never verbs; they are called verbals.
The nomenclature present or past is only a technical description and never a tense- marker. For example, a present participle ending in 'Ing' form need not indicate present tense. It can also be used in past situations. Similarly, a past participle can be very well used in present situations.

Eg: Worried about the toughness of the GMAT, test takers are frustrated these days. : See how the past participle worried is used in a present situation.

Taking the opposition head-on, Abe Lincoln emancipated the Blacks from the clutches of slavery: See how the present participle 'taking' is used in a past situation.
Therefore, the example that “Typing letters, she has grown old” does not indicate present tense as pointed out in the note. , But 'she has grown old' indicates a present perfect tense, but it isn't logical to say that she has grown old or is growing old while she keeps typing.

Since present participle is not a present- tense marker, the problem of differentiating a present participle from a gerund turns all the more tricky.

Present participle

When the verb+ing form or its phrase acts an adjective, modifying a noun, then it is a present participle.

Singing a song, Tom walked along the river.
Shouting abuses, Dick tried to browbeat Harry
By sending a bouquet, the students expressed their love for their teacher.

Here, the ‘ing’ forms modify a noun that is placed next to the comma. These are all present participles.

Gerund

On the contrary, when the ‘ing’ form is followed by a verb or verb phrase then it will be gerund.

Going by his words will lead to wrong conclusions
Shopping on week- ends is cumbersome because of heavy crowds.

Here are some ways to split between a gerund and a present participle.

As a gerund is essentially a noun trying to do an action, we can apply some of the attributes of a noun and see whether the ‘ing’ form fits within the parameters of the noun.

A. The first such test is whether the ‘ing’ form acts as a subject or object.

Singing is a pleasant entertainment

Here singing is the subject of a simple sentence; only a noun or a noun phrase can act as the subject of a clause. Hence, in the given context, ‘singing’ is a gerund

B. See whether the ing form is an object

Tom likes singing
Singing is the object of the clause; it is a gerund
C. See whether it has any adjective preceding it, especially in the form of a possessive pronoun

Tom feels that his singing is better than many others’ are

Here the ing form singing is modified by the possessive pronoun ‘his’. Hence, singing is a gerund.

D.Sometimes an article is gerund - marker. See whether the ing verb is preceded by an article such as ‘the’
The shopping’ at the Spencer’s is a delight.

E. See whether the ing word can be replaced by the word ‘it’ and the sentence still completes the meaning. Replacing he gerund with the pronoun ‘it’ can complete the meaning while a participle cannot.

Singing is a good past time

Here we can replace singing with the pronoun it – It is a good past time.

F... see whether the ing word or the entire ing phrase can be replaced by the word ‘something

Singing along the riverbank, Tom jogged for nearly four miles in one hour
(Singing) Something along the riverbank, Tom jogged for nearly four miles in one hour

(Singing along the river bank) Something, Tom jogged for nearly four miles in one hour

When you replace the ing word or phrase with something, nothing meaningful turns out. Therefore, the phrase starting with singing cannot be a gerund.

Now try this.

Signing along the riverbank is a refreshing pastime

After replacing the ing phrase, the sentence reads as (Singing along the riverbank) something is a refreshing pastime

Now you can see there is some meaning in the clause. Therefore, the ing phrase is a gerund in the context.
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Thanks for the explanation daagh.
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pankgarg
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Thanks everybody for your comments and kudos on this post; I need some more of those (is this the right usage ? I guess yes, remember "Those Vs Them :-) , I will soon share some more helpful tips.
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what a great post. it makes easy to understand one of most intricate topic in gmat.
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Excellent thread on verbs and participles and gerunds

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