Locally managed tablespaces are supposed to offer performance benefits over dictionary management. The idea is that extent information isn't stored in the Oracle catalog, so inserts and updates no longer have the overhead of potentially updating the catalog tables.
I was fortunate enough to attend a seminar by Tom Kyte of "Ask Tom" fame at about the same time as we started planning for our Oracle 9i upgrade. He was absolutely rapturous on the subject of locally managed tablespaces. In fact, he suggested that we perform our upgrade by exporting the old 8i database and importing to a newly created 9i database. As I recall, the issue was that the system tablespace could not be converted from dictionary to local management, so it was better to start fresh. He said export/import was the way they had done their upgrade, and the effort was worth it, as long as the database is not so large as to make to process excessively slow.