Damaging but not fatal. Bitcoins are divisible down to 8 decimal places so the value would just scale up according to the reduced supply. And 8 decimal places is a software limit; a revised protocol could increase that.
That's what backups (and brainwallets, etc.) are for.
Sounds like bitcoin requires a backup system by default, then. Because otherwise, the first virus written by some pissy kid that just deletes wallets will devastate a lot of people.
A virus which deletes wallets instead of trying to exfiltrate BTC seems much easier to implement and would be pretty devastating for the currency.