I think it depends on what you're doing with the documents. My current job involves writing 10-20 page legal memos based on a couple of 30-50 page briefs, and maybe a few hundred pages of supporting cases. I have to get comfortable discussing all the material orally. I print out everything because I find it to really help with recall (particularly verbal recall). On the other hand, if I'm looking for some particular quote I highlighted, its a very slow process to shuffle through dozens of printouts looking for what I highlighted. If I'm trying to sort and categorize my annotations, say by legal issue, dealing with paper highlights is obviously a bit cumbersome.

What I really want is to be able to write on and mark up paper and have it automatically digitized and indexed for sorting and retrieval.