Any lens will look good at small resolution. Compared to many lenses, the kit lens is crap, however, if you stop down a bit it will function fine.
Aaron
I dunno if it's okay stopped down, either. Check out Photozone's quality survey:
http://tinyurl.com/4ycyj
It's just a terrible lense, all around. But then I don't think anyone has high expectations for a $90 lense. It's probably good for the price -- only, if I drop more than $700 on a camera, I don't see the point of slapping terrible glass on it.
I think Mike H. even used to have a comparison webpage he made about how bad the lense is where he shot a scene with the kit lense and then the same scene with his 17-40 f/4L. I know it's not a fair compairson at all (one is eight times as expensive as the other), but it's a very dramatic example of just how important good glass is.
If I had no camera equipment at all and enough money to either buy a whizz-bang digital camera or really good glass, I'd get the glass and stick buy a less expensive film camera. You can get a top notch weather-sealed professional film camera like the EOS-3 for nearly the same price as the filmsy plastic Digital Rebel, and a middle-of-the-road SLR for much, much less.
I say that, of course, with preconceptions about what one wants from a camera. Not everyone cares if their images will look good when enlarged at 20x18. Many people just want to take some awesome images for their website/chase accounts. If that's you, then you can get away with the cheapest lenses you can find, because once you shrink it down to 800 pixels wide, every lense looks pretty good.