For those that have cut down their flywheel
 

Is this bad for a bike mostly ridden on the street?

No.

To expand on my answer a bit. Cutting the flywheel down doesn't make the bike difficult to control or temperamental in any way; it doesn't make pulling away from a stop any more difficult than with a stock flywheel. The engine just revs a bit quicker up and down. The effect is fairly subtle but definitely noticeable, especially if you ride it hard.

+1
Nothing elses spans the RPM range that the crankshaft does. Inertia there matters.