From Matt's quote, I just got the impression that sub-domains are an option and that GBot treats them as logically cohesive groupings of information, I didn't see anywhere that he said subdirectories were suddenly bad.
Then the author went on about best practices and getting burned for them -- he'd know better than I would if that has been true over the longer term -- I just didn't interpret Matt's comment to imply all that.
Some people must have benefited from Panda... I still find plenty of junk in my search results, but it makes me sick to think that if they hadn't rolled it out how impossible it would be to find good content at all.
I wonder what the logical conclusion of search engines/SEO and all this jazz will be in 10 years. If history is any indicator, we'll all swing back to some AOL-esque, walled garden, ad-driven existence where "Search" means nothing more than "find applicable ads"... I suppose that is somewhat true now.