I've heard that cooking with olive oil is bad for you and can be toxic. Is this true? If so, to what extent?
I see no warning on the container of my olive oil that states that it would be bad to cook with olive oil.
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:
General consensus seems to be that heating oils beyond their smoke point - which is generally low for olive oil - causes free radicals to form and can be toxic. Here's a summary of that information. So if you need to cook to high heat, you probably want to go with a higher smoke point oil like peanut.
There appears to be some research that highly unsaturated oils held at high heat for a long time can begin to break down into a toxic substance known as HNE. This research comes out of the University of Michigan. While olive oil is highly unsaturated, it wasn't mentioned specifically in this study.