And to put a reverse spin on this, buying links from a bunch of sites that specialize only in selling links can have a diminishing return as well, such as the well known case with the Oreilly network links. Too much of anything can be a bad thing, and all SEO work should follow a balanced approach that does not weigh too heavily on a single area.
I think that good directory links help alot; less good ones help less so. It is better to spend alot of time to get the best directory links than to just spam link. It is also importaint to note that some people do actually visit your website from these directory links. If the ultimate goal is visitors (not pagerank) then it makes sense to get links from wherever people will come to your site from.