I believe that the test needs to play a prominent role in college admissions. As the piece noted, it is a fairly reliable predictor of graduation rate, which is a very telling statistic. It shows how well students were able to adjust to the college curriculum and succeed at the next level.
What I worry about with the loosening of standards for SAT scores in admissions is that students are being admitted into schools that they are not fully ready to compete in. For example, with vocabulary and the SAT... the words featured on the test are not so obscure that one would not expect the average college student to be familiar with them. So if we let students into college who lack these words in their vocabulary, we are faced with two options: 1) let these students proceed in classes where it seems like the professors are speaking a foreign language or 2) "dumb down" the expectations of entering first years' vocabulary, thus leading to an overall watering down of the collegiate experience. I'm not saying that having a small vocabulary should be a barrier for students, but if they are genuinely interested in getting a good education, they need to spend the time to learn the language of complex ideas and creative description.
In summary: the test is flawed, yet it is a useful tool right now. I think to do away with it would be folly, but changes are definitely necessary. Now off to my next SAT prep course for these kids...