I found this issue of a Jaunary 2005 Scientific American lying around the house, open on page 70, an article entitled "Exploring the self-esteem myth". (Yes, that's the online printer-friendly version, also happens to be the reader-friendly version with less ads in it.)

Basically, it attacks our intuitive perception of how self-esteem affects our lives with some scientific studies. Among other things, research shows basically no correlation between self-esteem and academic performance. Most social skills also tend to fall into that group. Another myth put to bed is that of bullies having low self-esteem, doesn't seem to be the case.

But one aspect closely connected is happiness, extensive studies show that high self-esteem correlates with happiness, so we still need it, just not in the way we thought.