This neither confirms nor infirms Paul Graham's thesis. In fact, while PG's assertion was a bit too specific--pointy-haired boss means in general "bad manager", not "programmer turned manager"--I don't think you can deny that people want promotions, and in some places the only way to get promoted is to go into management. PG is of course correct in suggesting that if you want to keep programming, don't accept a promotion to a non-programming role. However, if you find this stunts your career growth, you can either look for a job in a company that will allow you to grow as a programmer, or you can choose to go into management. That many programmers are averse to this doesn't make it a bad choice. You just have to know what you're getting into, and hopefully how to do it well.
Programming to me has never been something that has to be continually pursued in order to stay fluent or able, but merely something that reflects your more basic skills and talents.
Depends on what your goal is. It's perfectly possible to build a good career without keeping up with the bleeding edge of research. You don't have to know what monads are to be well compensated (at least in a Western country). However, neither will you be the next Peter Norvig. If you want to make money, there's many ways to do that. If you want to eventually get a Turing Award... there's fewer ways to do that.
And the traits that make you a good programmer help you in other fields, even management. Yes, large corporations have structures, but we need structure to manage them. And we need managers. And a manager who was a distinguished developer will be much better suited for leading a team of developers -- even if he doesn't program any longer. This is a valid career path, and an interesting one at that.
A manager who is a good programmer will be golden at interview time. Whether he will also be a good lead is unclear. Like iand said, they should get out of the way and enable programmers to work optimally. As an aside, the structure of corporations and how it affects programming is an interesting topic worthy of its own discussion thread.