From a dental standpoint some pacifiers are better than others. However, it is really the way a child sucks the paci rather than the type that determines whether there are related orthodontic problems. Some kids can suck all day long and not move their teeth. Others will develop the dreaded open bite, overbite, or posterior crossbite*. Have you failed as a parent if your child won't let go of the paci? No. But I do have some recommendations:
1. I would rather have a paci in there than a thumb. You can't take the thumb away and a thumb habit is harder to break.
2. If you have to give your child a pacifier, I recommend the Nuk style seen here rather than the hard straight round kind.
3. Don't worry too much if the child's teeth get that overbite look. Most of the teeth movements that occur in the front of the mouth tend to revert to normal after the habit is discontinued. Usually there is no long-term effect so long as the habit does not persist into the permanent dentition. Basically, get the paci or thumb out of there before age 5 or 6 years of age. You've got a little time to work on it.
4. If the child develops a posterior crossbite, well that's not going to correct even if the paci is gone. Your dentist will likely need to place a crossbite "expander" for a few months to correct that.--very common orthodontic correction. Most of the time I wait till the child is at least five, but I have even corrected a posterior crossbite in a three year old (albeit a remarkable three year old)! Sometimes you need to wait till the child is older (after the six year molars have erupted). Oh one more thing, don't dip the pacifier in honey or anything like that!
*Update as of March 2006-The child in the photo above has two paci's in his mouth (and one in his hand). His mother just reported to me that he has kicked the habit. No more paci!
*If you are wondering about pediatric crossbites, expanders, or just want more info on crossbites, check here: Posterior Crossbites