Why is hypocrisy so terrible?

An alcoholic says to his friend, “Joe, I’m worried about you. You’ve been drinking an awful lot.”
Joe says, “Who are you to criticize? You’re a damn alcoholic yourself!”
Joe has a point, but that doesn’t mean his friend’s concerns aren’t warranted, nor that his advice isn’t good. In fact, being in that position himself and knowing how rough it is, it seems that he is exactly the right person to warn Joe against going down that path.

Why is it that people think it’s okay to ignore good advice depending on the source of the advice – if that source doesn’t follow the advice himself? Sure he’s being a hypocrite for not “practicing what he preaches,” but that doesn’t automatically make the advice not good, does it? Is a hypocrite really always a terrible thing to be?