Forgive my ignorance, but it's not like that methyl group just becomes a free radical, right? Does it stick to either the aspartate or the phenylalanine, and if so, wouldn't that potentially change the body's reaction?
In very high quantities, yeah, it's bad. Just like everything, including water and oxygen.
In small amounts, your body can handle methanol just fine. Which is fortunate, because it's present in many foods at much higher levels than what you'd get from drinking a can of Diet Coke.