Here is an interesting article regarding the NLT:
http://www.bible-researcher.com/nlt2.html
I had a NLT I used for personal study and Bible class in high school - this would be the first edition, by the way. So my concerns may have been rectified by the second edition.
The one concern I particularly noticed was in Bible class, and we were reading alound, from various versions of the Bible, and it was in the New Testament, and there was a list of sins, that pretty much corresponded with the fruits of the Spirit, if I remember right. The NLT ommitted one of the sins (either witchcraft, or murder, or something like that, I don't recall which). I was bummed since I liked how readable the NLT was... But I decided after that to go with a more literal translation. I am a big fan of the ESV now. The NASB is also great, and I have heard good things about the accuracy of the NKJV.
Like I said though, I am not familiar with the 2nd Edition of the NLT, so maybe it fixed some stuff. And I figure a paraphrase or less literal Bible that gets read is better than a perfectly accurate word for word translation that doesn't get read!