Look Ashley, according to your profile, you claim to be an SEO professional.  Are you saying you don't think a link from the Yahoo directory or even the joeant.com directory is a valuable one, or did you not realize they charge for links when you made your post?   I don't know any serious SEOs who would dispute the affect of listing a site in the Yahoo directory as well as two or three other good quality ones.  

The point here is that you're sending Craig to bark up the wrong tree.  I don't think he should have a problem if he is building a straight forward directory with strict editorial standards with followed links and a charge to review submitted sites.  There are scores of such directories out there that haven't lost their page rank.

I think his scheme of soliciting links back to his site in exchange for credits, and credit buying (resulting in increased exposure) is the problem here.  It seems like a not-very-subtle attempt to game the system.  It may also be he accepts every site that comes along resulting in a lot of links to spammy, low quality sites.