At what point does the law of diminishing returns come into play as far as ERP is concerned. i.e. Since the radio is essentially line of sight, does double the power give you double the distance?

It depends. Remember that ERP takes into account both radio output power and antenna gain. More ERP would definitely give you better range in the theoretical "mountaintop to mountaintop" line-of-sight-with-no-vegetation-buildings-or-weather-in-the-way scenario. In most real world situations, more ERP can give you significantly better performance through vegetation but won't let you be heard through a mile of rock.

Unscientific experiments with my ham radio HT indicate that I can get a couple of miles moderate tree cover with five watts simplex to another HT. It's more like half a mile to a mile at one watt. At 100 milliwatts I get maybe 100 yards or so. I can hit a repeater miles away easily with one watt though, since the repeater's antenna is so much taller than the terrain.