When should you start panicking.......

If I were asking them to do something really out of their way to accommodate me, then maybe I would be stupid. But look - the online app system of getting your referees to send their LORs directly through the school's proprietary system, as opposed to accepting them in other ways, is just a way to shove off more of the adcom's work on their applicants. (Maybe they feel like right-clicking on a PDF file sent to them via email and putting it in the right network folder is just too much to ask or something.) I've seen almost no examples of a school requesting truly unique information about the applicant on its rec form - they all ask for the same stuff with different wording.

I'll let you know how it works out. But I think that declining to jump through all the hoops here is a perfectly reasonable preference - they can't expect everyone's boss to have the time or inclination to care about Kellogg or Harvard or whomever's special form. If I'm paying $250 to apply to their horse and pony show, and my actual qualifications are good enough to have a decent shot, then they should be able to overlook my disinclination to worry about their unreasonable requests. And incidentally, the feedback I've gotten from Admissions offices I've asked about this have told me that, though they don't like it, it won't have an "evaluative impact" on my dossier.

Bottom line - if centralized, generalized applications are good enough for law and medical school, then B-schools should shut up and get on the train.