In the 2004 elections, political "issue" and "attack" organizations organized under section 527 of the tax code) were well-funded and involved in every facet of the campaigns. Donors funded the Media Fund a left-leaning online organizer, and Progress for America, a right-leaning group closely allied with the Bush administration. See this description of the Media Fund and this description of PFA. Now John McCain is sponsoring legislation in the Senate that would limit the donations to the groups to $5000 annually. See this Washington Post story. The Post story on the McCain legislation notes that Republicans have tended to do their organizational work "in-house" whereas a number of independent groups have grown up around the Democrats. Accordingly, legislation to reign in the 527s will be more targeted against Democratic-supporting groups.
527s are one more way that big money can flow into campaigns and unduly influence elections. The fact that donors to 527s are disclosed, however, is important. A 527 cannot easily hide its connections, whereas ordinary "501(c)(3)" tax exempt organizations are less transparent. If Congress places tight restrictions on 527s, it is possible that the activities currently conducted by them will simply migrate to other entities that provide even less transparency.
So is greater regulation of 527s a good or bad idea? I'm not sure.