Is cooking with olive oil bad or toxic?
I think this is a problem with all oils. When something burns, it produces smoke. Smoke is generally indicative of something that isn't particularly good for us if inhaled. Same holds for oils. It seems that all oils will begin to produce toxins once they hit their smoke point. However, before that, they are completely fine. So pick an oil that will handle the temperature you're using by checking the smoke point. 

There's also a difference between producing toxins and toxic. Does burning oil produce toxins? Yes. Will that actually make you sick? I don't know. But my inclination is that it's unlikely to cause you harm under "normal" usage or else we'd be hearing about people actually getting sick from burning their oil rather than just getting scare stories on the news about free radicals. 

And to get very sciency (stop reading immediately if your eyes glaze over, I think that's a sign of toxicity), from biology online:


  Researchers investigated processes of
  oxidative degradation - notably that
  caused at 70°C with ventilation - of a
  broad group of oils with very
  wide-ranging compositions. Another
  degradation process studied was that
  which is caused by microwave action
  that does not heat greater than a
  temperature of 190°C.
  
  In both processes deterioration of the
  oils takes place. In the first type of
  process (70°C with ventilation)
  hydroperoxides are first produced and
  subsequently aldehydes. In the second
  kind of process (microwave) it is
  basically aldehydes produced. It has
  to be pointed out that both the
  oxidative conditions and the
  composition of the oil determined the
  velocity of the degradation and both
  the nature and concentration of the
  compounds produced. 
  
  These studies have shown, for the
  first time, that degradation of lipids
  in foods can produce toxic oxygenated
  aldehydes. These compounds, well-known
  in medical studies for their geno- and
  cytotoxic activity, considered as
  markers of oxidative stress in cells
  as well as being causal agents of
  degenerative illnesses, had not
  previously been detected in
  foodstuffs. 
  
  Researchers have shown that some oils
  produce these toxic substances in
  greater quantities and at a greater
  rate. Virgin olive oil was, amongst
  all the oils studied, that which took
  longer to produce this type of
  compounds and produced a lower
  concentration of them.