I seem to recall that LOC correlated just as heavily with bugs and other problems as any other measure it was put up against. And, just like every other measure, gaming it leads to a degenerative case. (Can't remember where I saw this, or I would provide a citation.)

I'll repeat my current gut feeling. Intrinsic measures of software quality are terrible as guides for how to write code. They are decent at predicting quality, but are not usable in a prescriptive way to write quality code.