Is skill point banking allowed?

Yes is the quick answer--when done in moderation.

Most DMs feel that saving a ton of SP and dumping them into a skill at level 7 to maximize it (rogue level for tumble or UMD for example) is about as lame as you can get, and we will likely talk about how lame your character is to eachother if we find you doing that. If you are multiclassing and need to save SP form one level to the next to no take the CC penalty, most of us agree that is fine. Use some good judgement.

If you are taking that one level for the 1d6 sneak and for the UMD only, then in my opinion your character is more an excercise in powerbuilding and less an RP character. Just like an X level rouge who takes that one level of ranger for the free dual wield feat. I would say, if it makes RP sense in your character's progression to do it, then do it. If you have to overly justify it though, you are probably just trying to make an RP reason for an OOC powerbuild to exist.

Just so people are aware:

Skill point banking is done at your own risk. Beyond it being frowned upon when utalized in a powergaming manner, it also has the potential to invalidate your character and render them unplayable. In situations like this the DM team is entirely unable to help you.

It's not cheating because we feel it'd be a waste of our IG time to deal with it, rather than to make awesome quests or reward characters for great roleplay.

Ah, now that I've said that:

Any varation of this:

2 rogue / 4 fighter / 2 barbarian with maxed UMD, Tumble, Taunt, and Intimidate.

x rogue / 4 fighter, ... maxed UMD/Spot whatever is something I do not like to see. It grates on my nerves like a cold sore that never goes away. I see your powerbuild, and decide that since all you want to do is smash quests and exploit the engine, I really have no interest in working with your PC.

Thanks for taking the time to comment on my question.

Is it correct to say that it's preferable that I just avoid banking altogether?

I haven’t point banked yet, but I was about to put a point into a rogue skill with the cross class penalty on a fighter / rogue character. My following level will be in rogue.

I have "evil'ly" useful skills like tumble and listen maxed, but I also have significant points in several other rogue class skills. Does that mean that a negative reputation and exclusion are forgone conclusions, and I shouldn't worry about skill point banking at this point?

Could someone explain more about how to avoid character invalidation, or how it happens?

Thanks again.

Just try not to bank any skill points, unless say... you're saving one because you are cross-classing a skill every other level or something. Other than that, use'em if you have'em, and don't bank'em please.