I have heard many warnings about using this app unwisely with no specific information about its potentially destructive capabilities. Any help?

Nothing dangerous about this app. The only problem you might run into is if you put an app (like settings or categories itself) in a folder, and then upgrade the OS without unhiding those apps. After the upgrade, those apps will still be hidden and it might be something you need...like bossprefs, your settings, etc. So just unhide some 'important to access after upgrade' apps before doing the upgrade.