re: So the Directory is a kind of limited access blog posting.
Not really, but it is the process flow I modeled after to ensure as much uniformity as possible in user experience with core WordPress and Connections.
re: OK “They will be shown an “Add my directory entry” action link ” in the Admin upper right drop down box and also on the Directory?
Yes. The admin bar will always go to the admin. The link on the directory will depend on if Form is installed or not.
re: Since that scenario is my only enemy do you think I would be able to use the Say What plugin to replace that phrase with a blank or a dot?
Nope, what you have here should work fine: