Link exchange is important because it helps you gain link popularity and Page Rank. The best thing about the link exchange is getting a lot of links pointing into your site. As a result, this will enhance your PR, link popularity, and possibly your traffic. That's why building solid link popularity should become one of the daily tasks of your SEO campaign... read more at http://www.webuniver.com/marketing/link_development/exchanging_links/
When done properly it still has it's uses though. They may not help as much as they used to in PR or SERP, but then, in the end it's quality traffic that is key, and a few well placed reciprical links do far more then and extra green pip on your google toolbar. Most people know what a link is, most people have no clue what PR is, besides PR is not clickable. I'd rather have any high traffic PR 0 blog post over a permanent PR5 link that no one bothers to read... Likewise, I'd prefer to be in a link exchange that brings traffic even if the page is blocked via robot.txt over a page that no humans will bother to visit. Granted in both instances a one way link would be better...but that does not mean there is no value in linking back. Granted, finding a high traffic link page is often very hard to find
I dont think we should be worrying about what search engines want just producing good solid content and relevant useful links. Take care of the users and the search engines will respect this
You statement is great and sounds good, but look at some of the top listings for any search term. You will find very spammy sites with nothing but strings of keywords. Maybe the search engines are building for what you described, but they certainly aren't there yet.
Please be careful with link exchanges. And choose websites that relevant to your topic and have PR1+.