The only way it can be harmful is if you have dofollow on and it leads to blacklisted/malicious websites. If the website is relevant or clean it should be alright.
I get a few emails a week asking me for a link exchange on one of my sites.. it varies which one. I have gotten to the point where I use a canned reply.. blabla google manipulation, bla bla, no thank you, but.. etc. One useful (wordpress) plugin I use on my newest site will allow you to choose a blogroll link to appear as nofollow - with simple clicking.
The top websites in the world all utilize footer links, sitewide, blogroll (whatever you want to call them), in order to properly interlink their own pages and link out to their friends / parnters websites. The web, is a web of links, where people link out to sites they value, so I see nothing wrong with these types of links.
From my personal point of view, you should change it if you want to hit 1st page for competitive keywords unless you have many quality backlinks. http://www.bloggingbasics101.com/2010/02/nofollow-vs-dofollow/
I have been working on one site in particular, it's new since 4/5 months. I have zero outbound links that are followed, I'm waiting to see what Google does/thinks about this. lol
In SEO prospective cross-linking is considered as an unprofessional action because Google give less priority to the dual links corresponding both of websites! it is better to do one-way linking and avoid link exchange! because link exchange is become OLD method
Actually propagating this myth is more harmful to other webmasters. What is important is blog rolling links that are related with some PR.
Blogroll link will never harm your website ranking unless you do not selective on your outbound link enough. Most of problems I have seen with blogroll and a kind of link exchange is - not selective enough. You should not link to anyone just because they do link back to you. If their website has some sort of low quality considered from Google perspective then your website would be as same as them. From Google perspective, you can control your outbound link and if your linking are badly then it is your fault without a doubt.
Many websites are doing link exchange. Only avoid the link farms. Be safe and go for three-way link exchange.