There was always that battle with useless commercial listings, but that's not how I remember the end of dmoz. I remember Google (and other search engines to a lesser extent) just getting way too good at the time. There was also a content explosion around that era making directories just get too large, too slow to update, and difficult to use and manage.
But I still wonder if some (maybe niche) directories could work these days with the degeneration of search engines and AI slop. Actual humans curating links to useful information created or compiled by other humans sounds oddly refreshing.