Not exactly, but college starts don't always translate to the NBA. You could be one of the best players in the country (Trajon Langdon, Ed O'Bannon, Chris Carawell, etc, etc) and have no NBA potential. It's a totally different game. The college game is more about zone defense and shooting over those zone. The NBA game is more about individual talent.
I doubt that players like LeBron, Dwight Howard and Amare Stoudemire are doing anything to water down the NBA's talent.
The shooters in today's game are better than any shooters in any era. Look at the stats. Never was it in the NBA that teams could put five three-point threats on the court at the same time. Today, NBA teams often can.
It's just the beginning. The MJ era started the most popular time for the NBA. Kids are just now in the age group that they grew up in the environment that basketball is the most highly-respected sport.
Imagine this:
LeBron goes to North Carolina for two years and the University and the NCAA make hundreds and hundreds of million dollars off of LeBron James averaging a triple double. Everyone has an NC LeBron jersey. The NCAA sells its television rights for double the previous amount.
LeBron blows out his knee. He never had an NBA career and the millions of dollars he would have had are now in other people's hands.
I'd call that a negative effect.