A term to describe "thinking something bad is good"
Solution 1:
Quixotic might be appropriate in some circumstances. One of its meanings is 'naively idealistic'.
Solution 2:
Incorrect, blindly supportive, näively enthusiastic.
If someone continues to support an idea after it has been fully demonstrated as bad, you might consider them to be a mumpsimus (that word would also apply to the idea, as well as the person).
Solution 3:
I suggest these terms & phrases. They may help:
1-Drawback
2-Side effect or adverse effect
3-Tastes bad, works well
Solution 4:
In my experience, folly comes very close to the answer.