It's ok to submit your website in directories but better not to do link exchange with low quality directories, partners pages, resources pages, links farms etc.
Google can detect both link exchanges and 3 way link exchanges. The link exchange directories stopped working back in September 2005 after the Big Daddy infrastructure update.
You risk a penalty should Google believe that the link exchanges are a link scheme to manipulate the serps.
Nothing is wrong with link exchanges as long as it makes sense for your site. Try to keep the exchanges less than 30% of your link profile.