Well put, Slaktivist. I took a similar route, and found working on a conference paper to be of immense value. My LORs came from profs who worked with me on the project - so i had an excuse to get close to them. My paper served as a great writing sample that BOTH demonstrated my ability to do original research, my writing ability, and that I have a high level of creativity in understanding what is cutting edge.
But above all, I would recommend you do your research on programs FIRST. Reach out to profs you might want to work with, schedule phone appointments, talk with grad students, do much much more than just read the program website. Have a tight, focused understanding of what you're after, and pick the ACCESSIBLE profs working on that subject. I applied for PhD programs for the fall of 2009, and got straight rejections, but made it into an MPP program. I used the intervening two years to build my profile. this time, I have already been accepted to a top 30 program with a lovely funding package, and anticipate more good news. I think the greatest stride I made is achieving clarity and focus, and finding the profs who care about what I'm trying to do.