Is it worth paying for the Yahoo Directory, both in terms of driving traffic and link popularity?? I am considering not renewing the directory listing for next year as it is so expensive and would rather spend the money on other link building activities.

It really depends on the level of category IMO and if your competitors are there. I personaly do not think many people use directories any more but if you are listed in a high level category that is not overloaded with other listings, it can help build link popularity and drive traffic as well.