Thanks for re-assuring that I was reading it correctly.
I don't expect Google does have any way to detect if a link was/is paid for, for the purpose of PR. However, IMO, that doesn't automatically make it right. As you say, many SE and directories charge for links, BUT! It seems to be widely believed that Google simply passes on some PR to these linked pages based on the PR of the page housing the link AND how many other links are on the page. I don't subsribe to that theory and my reasons are this. I'll use the Yahoo directory as the paid link.
Some categories have much higher PR than others. Let's say that "Training" has a PR of 8 and only 3 pages listed and "Hotels" have a PR of 4 with 100 pages listed. So, why should a webpage, say in the training area, be given more PR than say a webpage in the hotel area? Surely Google would not pass on more PR as normal just because one is lucky enough to fit under a higher PR category? I would have *thought* that Google would say, Ok we will pass on to ALL pages in the Yahoo directory an additional PR of 1, all pages in DMOZ a PR of 1.5 etc. This way the paying for links it not left to chance of which category you just happen to fit under.
This becomes harder (to impossible) though for non SE and Directories pages. So while Google is not against paying for links, it doesn't mean it treats to PR flow the same on paid for links. IMO