[fuzzix]

I've managed this with a couple of projects. With one, it was C source, pretty discrete set of modifications so used git to do the leg work - one remote was our own repository, the other was upstream. I can't recall seeing a conflict when rebasing from upstream branches.

The other project explicitly allows for code modifications and accomodates them in a separate directory you can keep in revision control. Again, no memory of major conflicts in stuff we did correctly - i.e. used the provided overlays or callbacks.

So, when is it a bad idea? When you step outside certain constraints (like our callbacks example above) and override or replace or modify directly the project's own code in some significant fashion.

So, modification of open source for your own needs is a major plus if the project accomodates it sanely or the scale and nature of the changes are controllable.

edit Removed "and only if" in last paragraph, attempts to preclude people from providing better ideas.