Is practising mindfulness ever a bad idea? Are there ever situations where practicing mindfulness is not recommended during Buddhist practice. Could it ever have undesirable side effects or cause hindrances on the path. Or is it always the case that the more one practices mindfulness the better?

The motivation for this question comes from my own practice. I've really felt recently that mindfulness can have a negative effect on me. Perhaps swelling the ego and a lot of time contemplating what my emotions are, what I am doing and what I am thinking. This has ultimately seem very inward looking and counterproductive.

I don't really expect or want someone to diagnose my own particular quirks (you can have a go if you really want). But I do want to know if there is general advice from established teachers about the possible negative side effects of mindfulness practice and when it might be contraindicated.
Yes, practicing mindfulness can be a bad idea.

When one practices mindfulness, he opens his eyes and comes to see more and more things that were previously unnoticed. That is the reason why beginners tend to think "When I sit on a cushion, there's a fireworks of thoughts, images, etc. coming to my mind. It seems like an endless waterfall of thoughts, etc.". This is a mistaken conception, though, since these "fireworks" were actually already present, but merely unnoticed. Thus, cultivating mindfulness (along with vigilance) helps one understand better what delusions are the master of him. He also comes to feel that he is enslaved by these afflictions (which is a necessary step in Dharma practice, since it leads to generate the wish to abandon afflictions, recognizing them as the origins of suffering).

All this is painful and stirs the mind quiet a lot. Through cultivating mindfulness, we exhume "demons" that we might not be able to face yet, or to understand. We might shed the light on things we are not able to look at yet. That is one of the reason it is necessary to rely to a teacher who gives you practical (and boring) exercises and with whom you have interview every so often. Moreover, opening one's eyes is necessary but not sufficient. We have to change what we pay attention to and the way we pay attention to them (these are usually part of the exercises). This is difficult because karma drives us to pay attention to always the same things that feed our deluded mind more and more. In addition to relying on a teacher, one must study, because by way of studying the teachings of the Buddha, you will come to know what to pay attention to, where to look, and how.