Aside from the moral issue of stealing -- it's bad because the program Kazaa has the potential to use your computer and internet bandwidth without your permission.

It has program components in it that are 'hidden' behind a slippery end user license agreement, and, as I said -- some of these pieces of code can cause windows to run unstable, or your computer to run slower than it is supposed to.

Kazaa is "bad" because a company took an idea (like gnutella) and then fucks over it's users to turn a profit for the program.

Limewire, gnutella, and like open source projects typically do not contain spyware because they are truly "free" in that sense.