Productivity in Dwarf Fortress

Will bad things happen if I don't keep my dwarfs busy?
Any reason to not have idle dwarfs standing around other then personal satisfaction of working 'em to death?

If you have a couple dwarves standing around I wouldn't worry about it, but if you have a lot standing around, ask yourself this: why do you play dwarf fortress?

There is no way to win the game, so chances are you either have some goal in mind or your idle dwarves are evidence that you need a goal. Here are a couple suggestions:

• What part of your economy have you not gone to yet? Glass? Fertilizer?
• Megaprojects. Ever want to create your own volcano? Set up an in game Turing machine? Once your dwarves hit economy, go nuts.
• Arena. Why not create a gladiatorial arena? You can trap and toss in violent animals and goblins for your dwarves to fight. On the plus side you can get some legendary fighters this way.
• Declare war. Sometimes wars are started out of boredom. I'm not kidding about this one, real wars can grow out of not having anything better to do.
• Start a new fortress. Maybe on evil this time? Eskimo dwarves? The world is a scary place
• Bad ending. There are many ways to have fun, but only one bad ending. Seek it out.

AFAIK, it slowly makes them unhappy. But if you have a legendary dining hall, then you don't really need to worry about that :)