People in general have a hard time wrapping their ethics around any sort of close breeding. Most humans have a social and maybe even inborn revulsion for it. There are many reasons genetic diversity is helpful in nature. It lessons the chance of a bad gene expressing itself and it can introduce new "better" genes.
That said if you as the breeder are trying to control outcomes line breeding is necessary. Many morphs started out with just one known animal. The only way to isolate the trait is to line breed it. Like Slim's frogs, if the population has good genes the offspring no matter how closely related will have good genes. Barring some horrible spontaneous mutation Slim's frogs can continually make healthy offspring. It is the breeder's responsibility to ascertain how healthy the gene pool is that he has to work with. If the breeder starts seeing negative things that are genetically linked then those combinations should not be attempted any longer.
A breeder that is intentionally trying to breed outside his resident gene pool, I think has a greater risk of introducing a bad gene than he has by line breeding his known healthy one.