Is there something inherently bad about AT328 EEPROM

I was looking into different bootloader programs for my old Pro Mini's (I bought a lot of them when I started with Arduino).

For the option to allow access to the AT328P internal EEPROM there was a comment like "not that one would use it" or something like that.

Is there some issue with using the internal EEPROM? It seems it would be perfect to store settings etc.

Right. EEPROM is somewhat slow, no place for storing frequently used variables. But that does not matter while restoring settings once whenever the program starts.

I honestly did not know what a AT328 was. Since you write about Pro Mini's, it must be a ATmega328P.

There is absolutely nothing wrong with the internal EEPROM.
The bootloader can not turn it on or off, that is independent of the EEPROM usage in the sketch.

I'm guessing that comment was in the code for a bootloader ?
Then it is about using the EEPROM in the bootloader. Probably no one would use EEPROM in a bootloader, and therefor the functions to access the EEPROM should not be included in the bootloader. What you saw is perhaps the option to include those functions.

Some bootloaders use a trick to allow a program to access to the ATMEGA328P flash memory. Maybe that is what is being referred to since this is an unusual requirement. The eeprom is perfectly valid for persistent storage but has a limited number of write operations.