I understand that time is an insecure seed for random number generation because it effectively reduces the size of the seed space.
But say I don't care about security. For example, say I'm doing a Monte Carlo simulation for a card game. I DO however, care about getting as close to true randomness as possible. Will time as a seed affect the randomness of my output? I would think the choice of PRNG matters more than the seed in this case.
For security purposes you obviously need a high entropy seed. And time alone cannot provide that.
For simulation purposes the quality of the seed doesn't matter much, as long as it's unique. As you noted the quality of the PRNG is more important here.
Even a PRNG in a game may need to be secure. For example in multiplayer games a player might find out the internal state of the PRNG and use that to predict future random events, guess the opponent cards, get better loot,...
One common pitfall using time to seed a PRNG is that the time doesn't change very often. For example on windows most time related functions only change their return value every few milliseconds. So all PRNGs created withing that interval will return the same sequence.
Just for the sake of completeness, this paper by Matsumoto et al. nicely illustrates how important the initialization scheme (ie. the way of choosing your seed(s)) is for simulation. Turns out a bad initialization scheme may strongly bias the results, even though the RNG algorithm as such is rather good in principle.
If you are just running a single instance of your program, then there should not be too many problems.
However I have seen people who starts multiple programs at the same time and then each program seed with time. In that case all the program gets the same sequence of random numbers -- In particular I have seen people seeding an apache process at each call to use a random numer as session-id, only to find that different people hitting the webserver at the same time get exactly the same IDs.
Hence if you are expecting to run multiple simultanous version of the program, then using time is a very bad idea.
Think that your program runs very fast and asks for the system's time to use as a seed in a great sequence, with a very few interval. You could get the same time as the answer, so it would end up generating the same random number. So, even in a simulation, a low-entropy can be a problem.
Considering that it's not that hard to have some other sources of entropy in your system, ot that even your operating system can provide you some almost-random numbers, you could use them to increase the entropy of your time-based-seed.
