Only quite recently, my fiance offered several listing options (Basic, Regular and Featured) on a web directory which he has left free for some time. The Regular and Featured options are paid review listings. Imagine the surprise when we discovered that there are people who actually went for the Regular listings option. Previously, the intention was to simply let it go free for sometime before converting it fully to paid. Never realised that the free/paid model could actually work.
Yes, DMOZ is a poster child of what free directory shouldn't be... never the less, it's free and just for that reason alone it deserves credit.