The argument isn’t that PNGs are bad for games… it is more like PNGs are bad for download size when compared to other relatively simply image storage methods that are suitable for game images.
Cas is getting data that is half the size as PNG for the same image… since he is making a downloadable and images make up a big chunk… he is saving quite a bit by not using PNG.
Ok, and the licensing? My game is going to be free, how will using AWT to load png´s limit my ability to distribute the game etc?
(The other advantage of not using standard Java PNG support is I don’t have to load a ton of other classes and DLLs just to read a trivial image file)
There are no licensing restrictions on PNG usage.
Cas 
[quote]Ok, and the licensing? My game is going to be free, how will using AWT to load png´s limit my ability to distribute the game etc?
[/quote]
That was referring to making a native executable from the Java classes. Which is something Cas wants to do for Alien Flux (and have the standard .JAR for non-windows platforms)… The thing that makes binaries requires that you distribute the whole JRE if you use any of the Sun’s AWT classes… I guess they don’t have their own implementation of mst of that stuff, and the Sun license says you can’t “cripple” the JRE by only shipping bits and pieces.