The variance is grey no doubt. If we are talking about on topic link results in this network (which I don't think they are - but lets go with it for discussion sake). The answer to "how is that bad?" "no different from a categorized directory" or "webmasters linking" comes back to Stark's main point. If it adversely affects results in the SEs eyes then its ultimately "bad" from the SE perspective and in the long run they will seek to protect their results.
The extent to which it is bad and how much SEs care depends on the extent to which the results are gamed, the proliferation of such gaming, the whether there is degradation of quality in the SERPs as a result.
To answer your question more directly, if categorized direcotries become abusive (in SEs eyes) then those too would be targeted. (Seeing it now with the DMOZ clones and other "bad" directories)
When you bring it down to comparing it to a webmaster linking to another site you are ultimately talking about one entity voting for another and that is the *best* vote which the SEs can hope for right now aside from that entity being an authority. So the difference there is that the webmaster level is not contrived or done in mass. If done in mass then you have the network we are talking about. :)
I understand these things may be difficult for the SEs algo to 'prove' and this has been some of the debate, but you can guarantee that if something begins to signifcantly affect their results by making them less relevant they will take notice and start thinking of measures that can be taken. How successfull they are this? Well that's the eternal struggle for the SE isn't it.
Participation in this "coop", "scheme", "program", whatever you want to call it, ultimately comes down to the risk threshhold for your sites and your confidence in such tactics (whether it be short term or long term). The same decision we all make everyday when we pick the hat shade we are comfortable wearing.