I noticed on the papers that came with my by-pass valve (AEM) that it said that it might make it lose horsepower. Also, I've heard that from other people.

Is this true? I know on the instructions it said to get a rubber piece from Lowe's or somewhere like that during good weather to help the CAI b/c I had thought about putting one during nice days.

I can vouch for a loss of power. I hate my bypass valve. In fact the SOB broke about a month ago and I was running a short ram(short ram intakes suck compared to a CAI....). Today I finally found a store that carried some nice 2.5" wide rubber hose and I paid close to $7 for a 6" piece to replace the bypass valve. Not only does it feel peppier, I love having the sound back again. Maybe I'll take some pics.

Yes. There is a different with and without bypass valve.

There's a negative effect when the foam inside (*cough* old AEM) bypass valves disintegrates and gets sucked through the engine.

IMO if you live somewhere you expect to be submarining around on a regular basis, run a short ram! Or at least get one that you can swap back and forth in 2 minutes when you're late for school, and realize it's raining.

The bypass valve does a good job at robbing you of power for sure. I felt a difference when I finally took mine off. Sounds better too.
I got the rubber piece complete with clamps already on it at Home depot, in the plumbing section, for like $0.59.

Yup i felt a power loss, so when i knew it wasnt going to rain i took it off, when it was going to rain put it on. Or when i was going to car shows id put it on, for w/e reason lol. During shifts is where it seemed to fuck up the most. Because it works off loss of pressure post bypass it'll open when pressure's lost after it. So it'd open up between shiftsx( and fuck everything up