To me, genus and species in paleontology are just ranks which represent the same: nested groups. Putting aside criticism to the biological species concept, you have no way anytime soon to see who has fertile descent with who among fossil specimens, so to group individuals in species you have to rely uniquely on mophology, the same as with all other larger, supraspecific groupings. No difference there.
Exactly. Most species concepts, and this seems to include all interesting ones, require some kind of approximation to population biology, and with most fossil vertebrates that is just not feasible.
I am therefore glad that the PhyloCode will let us stop pretending that we can shoehorn every organism into a species: it will allow us to use specimens that don't belong to a named species as specifiers in the definitions of clade names. (And of course it does not define "belonging to a named species"!)
So, to me, paleontology would be better stop talking about genera and species (the latter term may still be useful regarding not-mixing of gene pools in our times), but about (as ugly as it may sound) of specimens referred to by their catalogue number (or perhaps given a more aesthetic name, such as "Sue" and "Leonardo").
That's not necessary. Just name smaller and smaller clades, all the way down to the LITUs (least inclusive taxonomic units = smallest recognizable clades), without bothering to find out which (if any) of them correspond to species under which species concept. Probably all currently recognized Mesozoic dinosaur "species" -- and genera -- are LITUs anyway, so...
(Never forget: as of February 2009, there are 147 species concepts out there; depending on the species concept, there are from 101 to 249 endemic bird species in Mexico. All those species concepts have nothing in common except the _word_ "species".)
I think diversity studies may be more difficult to be carried on if abandoning usage of species as a special, and only one, accepted rank. However, I see the same problems with their use as with the previous use of genera and families.
I promised the references on the Phylogenetic Diversity Index long ago. Here they are at last:
Daniel P. Faith (1992): Conservation evaluation and phylogenetic diversity. Biological Conservation 61, 1 -- 10. (1994a): Genetic diversity and taxonomic priorities for conservation. Biological Conservation 68, 69–74. (1994b): Phylogenetic pattern and the quantification of organismal biodiversity. Philosophical Transactions of the Royal Society of London, Series B: Biological Sciences 345, 45–58.
And here an application:K. Nehring & C. Puppe (2004): Modelling phylogenetic diversity. Resource and Energy Economics 26, 205–235.
The PDI uses topology and branch length to measure the uniqueness of an OTU and the diversity represented by a tree. That's much better than just counting species, even in the highly improbable event that they were all named by a single person who used a single species concept throughout!