Light diodes exist, and yet the 2nd law endures. In general, any perfect ratchet would allow you to violate the 2nd law. Since very few Nobel prizes have been awarded for perpetual motion machines, experimental evidence seems to suggest there is no such thing as a perfect ratchet.
When confronted with any type of device that rectifies the flow of energy, the appropriate question, in my opinion, is 'how is this device imperfect'? In the case of a Faraday isolator, Lord Rayleigh addressed this question a long time ago.
EDIT:
The other reference at the end of the Wikipedia article on Faraday isolators is a pretty nice discussion of this topic.
I might see part of the problem here. There are processes in which energy is extracted via heating from a thermal reservoir, and in the process the system does positive work on the environment, and all of the energy coming in via heating gets transformed into work. There are many canonical examples in classic thermodynamics: the main one is an ideal gas undergoing an isothermal expansion.
So when you say
The hot reservoir provides heat energy to the system. Does it cause a decrease in entropy of the universe(system + hot reservoir)? How? In order to receive heat wouldn't the system have to be cooler than the reservoir? If so, then entropy increases as the heat energy gets expelled from the reservoir at a higher temperature than the temperature the system receives the heat energy. Is it so?
you are correct. This doesn't violate the Second Law at all, for the reasons you have expounded: either the system and the reservoir have the same temperature while they are exchanging energy via heat---in which case the net change in entropy is zero---or the system has a smaller temperature, in which case it is straight-forward to show that the system entropy increases more than the reservoir entropy decreases.
So what is the actual statement of the Second Law here? It is this:
It is impossible to construct an engine which will work in a complete cycle, and produce no effect except the raising of a weight and cooling of a heat reservoir.
The operative word there is "cycle": if the system has to operate on a cycle, then the entropy increase of the system caused by heat flow from the hot thermal reservoir must be offset by an entropy decrease, as I explain in this answer. This means that the system must expel energy via heating to a cold thermal reservoir, and that is exactly the reason why a perpetual motion machine doesn't exist: some of the energy must be wasted.
This is what people talk about when they talk about perpetual motion machines of the second kind: in order to have "perpetual motion", the system must repeat its motion over and over and over again, forever. In the processes I discussed above where all of the heat is converted into work, the system doesn't reset (it doesn't operate on a cycle!), and so such a machine must eventually stop. On the other hand, if the system does reset (i.e. if it does operate on a cycle), then some of the available energy is wasted every cycle, and so eventually again, the machine must run down and eventually stop.
Best Answer
First of all, nantennas in general don't violate the second law of thermodynamics, so they are not perpetual motion machines of second kind. As long as the total entropy goes up, the second law is obeyed. In other variables, it really means that a part of the incoming heat has to heat the nantenna up but there may still be a lot of energy left for energy production, much like in any other heat engine.
The Wikipedia suggestion that natennas could violate the second law only referred to a particular application hypothesized by Mr Novack. If he could be cooling the room while getting energy out of it, and if the gadget to cool the room were not connected to any cooler heat bath, then it would indeed be a perpetual motion machine of second kind and it would be impossible.
The reason why Nature makes it impossible is kind of trivial. If the room has temperature $T$, then the nantenna or "power plant" may only be kept at the same temperature $T$ if there's equilibrium. But if that's the case, the nantenna emits thermal radiation, too. So even if it absorbs some incoming radiation, it still radiates its own. They're balanced and the energy gain is zero. Solar cells and "legitimate applications" of nantennas can only create energy because they work with incoming light whose "own" temperature is higher than the temperature of the solar cell or nantenna itself. For example, solar radiation has the temperature comparable to 5,500 Celsius degrees.
The solar cells are effectively heat engines operating between this high temperature and a much lower temperature of the ground. The same is really true about life on Earth, too. The energy from the Sun may be converted and is often converted to useful energy or work because the high-energy photons from the Sun – which correspond to a high temperature and therefore a low entropy per unit energy ($E\sim TS$) – are processed on Earth and the energy is finally emitted in much lower-temperature "infrared" thermal photons – which carry a higher entropy. So the entropy can go up even if a part of the incoming energy is converted to useful work. The temperature inequality between the solar surface (and the solar radiation) on one hand and the cool temperature of the outer space is necessary for the Sun to play this often praised beneficial role.