Counterfeit money is an ugly thing, not only because it can be harmful (anything can be), but also by nature it awards swindlers and punishes trustful people. Even guns are more neutral than that.
I disagree. If fiat itself permits to be physically reproduced, it's not the counterfeiters fault! And this would only punish speculative banks and governments - the only real ugly things.
Nope, it would only harm us. If counterfeit banknotes became a real problem, it would help them push centralized electronic payment methods, cheques, etc. They would gladly destroy cash if they could, and they definitely will in the not too distant future.