<p>I recently had to work on a project where the previous developer modified the wp-admin directory. It seems like a bad idea to me, since Wordpress is constantly updated. Am I just not at that level of expertise with modifying Wordpress?</p>

Being open source, I think it's a common thing for software like WordPress to be modified and extended at any point.
To modify or not to modify is a choice between trade-offs. New features can be encapsulated as modules, which may, perhaps, cause their functionality to be less integrated than desired. However, fully integrating changes may hinder easily updating the software as new versions are released.
It does require that someone be very familiar with the software to modify the software directly, but this isn't necessarily a bad idea.
On a side note, I think modifying WordPress is almost a necessity, especially if you want it to have a decent architecture or to actually be secure (ok, that was a jab, sue me).