I have a phobia of most bugs (spiders the worst), but still can't stand the idea of killing them, and can't bear being around if someone else is killing them (exceptions for health hazard situations).
I've tried to teach DS(3) to have empathy for all living things including insects, and to my pride, he now comes to tell me when a bug 'wants to go home' and I should 'put it outside'.
However, it has all now slightly backfired on me as he has gotten way too friendly with his little insect pals. Today he ran up to me with something in his hands beaming, "Look mummy, spider!"
I just about fainted on the spot. Had to try and get him not to dump it on me without panicking and screaming (don't want to pass on my phobia). Luckily it wasn't a spider but another less-phobia-inducing bug, but still!
In any case, I think it's good to value life, all life. There are occasions where we have to harm other life (ie. self-defence, threat to our own health), and arguments to be had about other justifiable reasons (food, clothing). But I don't think it can ever be acceptable to kill just for the fun(?) of it, and would never encourage this.