Is hidden text bad for search engine ranking?

Yes.

Hiding text or links in your content can cause your site to be perceived as untrustworthy since it presents information to search engines differently than to visitors. ...

If your site is perceived to contain hidden text and links that are deceptive in intent, your site may be removed from the Google index, and will not appear in search results pages.

http://www.google.com/support/webmasters/bin/answer.py?answer=66353

This is the very definition of black hat SEO and probably the most obvious. Doing this is asking for a ban.