There are no bad plot devices – just overused or inappropriate ones that have been employed in a cliched manner. Hopefully you’ll be able to expand your repetoire to include the occasional prophecy within your campaign, because making foolish predictions is part of human nature, and not-so-foolish prophecies are a staple element of the fantasy genre – which means they need a little more effort to avoid the cliche.

I generally hate “prophecy” or “destiny” as a plot device in fiction and gaming. It’s not the potential for railroading that bugs me, it’s the “just because” nature of prophecy. I like to know WHY things are happening — usually driven by some human motivation, social trend, or natural phenomenon. Saying something happens because it was “destiny” is equivalent of not giving any reason at all.

The only prophecy plot lines I can think of that I like are the self-fulfilling kind. These are epitomized in Greek myth, where the child is prophesied to kill the father, so they abandon the child, only for him to grow into a hero and kill his father (the jerk). A more modern interpretation is the use of prophecy in the Harry Potter stories. Everything that happened in those books was due to people struggling to make it happen; the prophecy only acted as a sort of catalyst for the human interaction.

So I definitely shy away from prophecy in my games; it often seems like lazy and uninteresting storytelling (a cliche that has been played out one too many times). But using the techniques you outline above, prophecy could go beyond the “ho-hum, more inconsequential exposition” and become an actual interactive campaign element that the PCs can do something about.

With this, you set up a prophecy using either an if then else statement, or something similar. for example, “If the crown of Teles remains intact, then a great kingdom will fall, yet if the crwon falls, the orcs will rise.”

It give the players an idea, or choice of what to do, and gives the campaign a clear path regardless of whether the characters succeed or fail in whatever path they choose to take.

The most important aspect is to ensure that as DM you aren’t using the prophecy to railroad the players. They shouldn’t hamper creativity.
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Except one exceptionally powerful occultist, who was nigh-immortal, decided to stack the deck in his favor. He tracked down the prophecies, and altered their texts. This was back in the late 19th century, when there weren’t exactly a lot of copy machines or computer back-ups to double-check the wording. He also watched for key players in the upcoming true prophecies, and worked to corrupt or eliminate them.

One set of PCs ended up fighting this guy, and ultimately killing him (in a really nice climax where they were able to use his twisting of prophecy against him). This went down in 2007, in game time.

The new set of PCs is now trying to figure out what is happening next. The world is still clearly barreling towards some sort of metaphysical cliff, supposedly still in 2012. But, all the signposts have been removed. Even the gods are baffled, as events are not unfolding as they should. And yet, many prophecies are still finding ways to get fulfilled, just not in the time or manner they were supposed to.

So far, the “broken prophecies” concept is working really well. The PCs can anticipate certain actions of the other factions, who are still trying to follow their prophecies. But, the rails have also clearly been removed for the PCs to be able to achieve anything.
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