What happened to the Site Directory template in SharePoint 2010?  This feature was deprecated by the product group, because new features in SharePoint 2010 were deemed a better way to automatically navigate and find sites and content, over the Site Directory model (which was admittedly a bit clunky, if you ask me).

So in SharePoint 2010, there is no longer an option to create a site with this template, and the portal site template does not include a Site Directory.

Now, if you upgrade a MOSS 2007 farm to SharePoint 2010, any Site Directory sites that you have will be upgraded and remain fully functional. So existing site directories are supported, but not the creation of new ones.  This is why Central Administration still has an area to configure a Site Directory (under General Application Settings); so you may continue to manage any upgraded site directories correctly.

Bill Baer’s excellent blog gives some additional information on this topic, including the new features of 2010 that are envisioned to be better replacements, such as Tagging, Notes, Managed Metadata and Metadata-based Navigation.

Finally, for those who want the specific functionality of the Site Directory in SharePoint 2010, a CodePlex solution is available: http://spsitedirectory2010.codeplex.com/. This solution “follows the same basic principle of the Site Directory in SharePoint 2007 but adds some commonly requested features”