Hi Traumahawk,
Yep, unsprung weight is bad. Actually sprung weight is bad also. Most extra weight is bad! But unsprung weight mostly affects handling and has no bearing on the HP that's making it's way from the engine to the rear wheel and onto the road.
Unsprung weight means the weight that is carried that is 'under' the springs. Hence the 'unsprung' terminology. What happens with unsprung weight is that the heavy mass has no springs/shock absorbing mechanism to control it. Therefore, it's a harder mass to control regarding handling.
When most weight is carried above the spring/shock absorbing mechanisms, then it's called 'spung' weight, and is positively controlled. So you want most weight 'above' the springs/shocks for better handling.
Now............ when it comes to HP, you want to refer to static mass vs rotating mass.
BOTH are badddddddddd!!!! But here's the kicker;
Static mass is actually easier to get moving. Rotating mass is harder, as you not only have to carry it, but you have to get it spinning (like getting a heavy merry-go-round moving.
Rotating mass is also harder to stop then static mass. So rotating mass will adversely affect acceleration as well as stopping. PLUS, you still have to carry it around.
Rotating mass (or sometimes called Dynamic mass), is the worst way to carry extra weight.
Depending on how far to the outside circumference the rotating mass is carried, it can calculate out to a pound of rotating mass is equal to 4 pounds of static.
So in other words, if you had to carry an extra 1lb around with you, you'd be better off carrying it on the seat behind you and not on the rotating wheels.
To sum it all up;
1) Unsprung and sprung weight is all bad
2) Unsprung and sprung weight will BOTH negatively affect handling.
3) BUT, sprung weight is the better way to carry the weight (above the springs/shocks so that it can be controlled properly and keep the tires in contact with the road surface).
4) Static and rotating weight: BOTH bad!
5) But, if you have to carry weight around, keep it non-rotating. By eliminating as much unnecessary rotating weight (especially on the wheels/brakes/tires), then you get to use more of the HP that the motor is generating, as opposed to wasting this energy trying to get that heavy merry-go-round to spin.
Yes,,,,,,,,,,,,,,,,, a heavy wheel/tire combo will help eat-up some of the HP you're making. And it will also make braking less effective.
Here's a very good article defining some of the terminology much better than I attempted to do;
http://victorylibrary.com/mopar/sprung-c.htm
And a quick question/answer from the bicycle folks asking a Dept. of Physics about rotating weight on wheels;
http://van.physics.illinois.edu/qa/listing.php?id=7559
Vinnie