From what I'm gathering, you are not supposed to be "bad" obviously, but it also seems that you are not supposed to be "happy" either?
Am I getting this right?
 Are we to exist without karma, akarma, so be neither good nor bad?
It's not like that. The sole purpose of Hinduism is to show the path of true happiness to all beings. It's because happiness is the inherent desire of every jiva and until and unless one jiva becomes truly happy he will be doing various kinds of activities, good and bad and getting entangled by their reactions.
It is just that the definition of happiness is something different in Hinduism:
yo vai bhuma tat sukham, nalpe sukham asti, bhumaiva sukham, bhuma tveva vijijnasitavya iti, bhumanam, bagavah, vijijnasa iti. [Chg. Up. - 7.23.1]
Happiness is infinite, there is no happiness in finite. Happiness is completeness, happiness is the totality, happiness is in the Absolute.
Real happiness is something, upon which sorrow and distress cannot take over. That which wanes away is not happiness. Everything material being under the influence of time is certain to perish at some point, so happiness that is dependent upon material things, positions and qualities are certain to cause distress upon their loss. So Vedanta school of thought from Hinduism teaches to fix the mind upon God who is imperishable and eternal, hence by doing so the happiness that will be derived will also be eternal.
Now the other thing is, bliss is probably the suitable word to express that state of happiness . Bliss is superior and beyond happiness and distress. So the scripture states that state of saintliness and serenity is achieved by him who neither delights on happiness nor gets agitated in distress:
duḥkheṣv anudvigna-manāḥ sukheṣu vigata-spṛhaḥ
vīta-rāga-bhaya-krodhaḥ sthita-dhīr munir ucyate [BG - 2.56]
One who is not disturbed in mind even amidst the distress and miseries or elated when there is happiness, and who is free from attachment, fear and anger, is called a sage of steady mind.
Happiness is the core concept of Hinduism and that's why it prescribes all the rules and regulations. Because happiness is the natural outcome of dharma (right actions). There is a beautiful verse regarding this but I don't know where it's from. It is as below:
सुखं वांछति सर्वो हि तच्च धर्मसमुद्भवं
तस्माद्धर्मः सदा कार्यः सर्ववर्णेः प्रयत्नतः
Everyone desires Happiness and that arises only from dharma. Hence, dharma (right action) should always be the duty and endeavour of all.
The goal is eternal happiness.
Yudhisthira said,’… Even thus, endued with actions, creatures come into this wheel of life that is continually turning like the wheel of a car, and even thus, coming thither, they meet with their fellow-creatures. He, however, who abandons the worldly course of life, which is really a fleeting illusion although it looks eternal, and which is afflicted by birth, death, decrepitude, disease, and pain, is sure to obtain happiness. When again, the very gods fall down from heaven and great Rishis from their respective positions of eminence who, that is acquainted with truths of causes (and effects) would wish to have even heavenly prosperity? ..... Reflecting on these circumstances, this nectar of wisdom hath come to me. Having attained it, I desire to get a permanent, eternal, and unchangeable place (for myself). Always (conducting myself) with such wisdom and acting in this way, I shall, by betaking myself to that fearless path of life, terminate this physical frame that is subject to birth, death, decrepitude, disease, and pain.
Mahabharata Santi Parva Section IX