Every now and again, when I have only one or two open schollies, I'll skip FSS. It is a big help, but it is easy to spend too much on FSS, then get into a battle for the recruit with the high potentials and end up with a worse recruiting class than if you went without and looked only locally and managed your budget better.
Here's the thing: If you get a scouting report or two on a player that either drops down or started at your level, then you have between 4 - 8 different categories of information about him. If you see enough that you like in the original ratings, then it can be worth the risk to avoid spending the additional sums on FSS. Partial information, as long as it's accurate, can give you enough to make good decisions.
That said, as long as you manage your FSS budget to match the amount of openings that you have, it is indispensable. For instance, your team is in D.C. I have a team in D.C. My experience is that it is usually a mistake to FSS Pennsylvania, because it is too expensive. You can do a bunch of smaller states that still give you recruits within 200 miles and save a bundle. Of course, going without FSS or scouting is a good way to end up with a crap class.