The oiling issue is one point of concern. The oil can be pulled off the filter and coat the MAF sensor and then dust will then stick to it causing it to have a greater and greater error rate.
The other point of concern is the it simply is not a very good air filter. You have a very expensive Toyota engine, why would you not want as much dust and dirt filtered out of the induction air? Just hold it up to the Sun and see all the holes in it that are way larger then dust particals you want to be filtered out.
If you are trying to decide between the K&N filter and a stock Toyota filter, I say go with Toyota every time. It is a very nice high quality filter and they are using a synthetic media and not just cheap paper.
If you really think you must go with an oiled gause filter then pick from one of the other brands out there. AFE (makers of TRD) use more layers of cotton. Airaid uses a thin layer of synthetic media on the inside and a couple of layers of cotton on the outside. As far as I can tell of the oiled cotton filters AIraid appears to be ahead of the game.
Gadget