I think the idea is to discourage the behavior in general not just that particular instance of it. If the majority of people don't like being followed and "complimented" against their will or comfort level, there is absolutely no need to be demure in condemning the behavior. Thanking someone for their gracious attention is nothing but encouragement.
This. It's not about someone "trying to be nice." It's about men feeling entitled to comment on womens' bodies and appearance in general. Because those same guys being "nice" to some women are very likely the same guys saying "no fat chicks" to my best friend or to other women who don't meet these guys' standards of how women are "supposed" to look. It's called street harassment; it's NOT ok, and it's not about being "nice."
I think the OP handled it just fine, actually. She wasn't rude, but she let the guy know clearly that his approach was not welcome. Maybe he'll think twice before he does it again to someone else.
For the record, in my experience, guys who have called out to or approached me on the street want one of three things: 1) to pick me up, 2) to ask me for money, or 3) to push their particular brand of religion. None of which are remotely welcome.
I have occasionally been asked for directions, but they usually start with "Excuse me, do you know where X is?"