I have to agree with Brian on this one.
Link exchanges don't have nearly as big as an impact as a one-way link.
Meaning the website is linking to you but you're not linking back directly. With that being said, link exchanges won't hurt you, unless you are exchanging links with a site full of spam or malware.
I have gotten a lot of sites to the first page of Google and I have never done a link exchange with anyone. I've done it with a combination of good ON-page SEO and high quality one-way links.
Another reason I don't do any link exchanges is because everytime you link out of your website you are leaking what is called "link-juice". Everytime you build a backlink to your site, you are building up your link juice. Ideally, you want to keep all that link-juice within your site and not pass it off to any other sites.
Hopefully that makes sense and wasn't too "geeky".
Andres Tobar
SFS.Jon-Don.com