Personally I think the data dictionary approach would be better served using a data modeling tool like Toad Data Modeller or Rational Rose. (I use Toad myself).

That way not only do you have the tables laid out graphically, showing relationships, you also have the comments for each table and field, plus any functions, and if you use the built in domain tools you have consistancy across tables for things like zip codes, phone numbers, etc.

Since I wrote a small Access tool to generate the basic stored procedures and it has the ability to let me create more complex SPs myself (along with notes, etc) I find I don't rely so much on SQL Server for documentation.

IMO a dedicated data modeller is the most logical place for documentation anyway, since it basically is both documentation *and* script creation tool.