What makes spiral instability less harmful than Dutch roll?
Because spiral instability is easier to address by the pilot than Dutch Roll tendencies. 

Spiral instability is instability about the longitudinal axis. For example, spiral instability means that if the right wing tip moves down, it continues to move down rolling the plane to the right. Its simple to detect and address with left aileron. 

Additional information on spiral instability available here: http://www.faatest.com/books/FLT/Chapter17/SpiralInstability.htm

Dutch Roll causes cross-control-type movements across two axes, the vertical and longitudinal axis, such that when the airplane rolls right, it yaws to the left, then it swings back the other way and rolls left, while yawing to the right. This movement is difficult for the pilot to counteract and the inputs from the pilot can actually amplify these movements.

Additional information on Dutch Roll tendancies available here: http://www.faatest.com/books/FLT/Chapter17/FreeDirectionalOscillations.htm