My question: After earning a PhD degree, is it bad form to remove from your CV that you have also earned an undergraduate degree (possibly from a lower ranked place)?
Yes, I think this is bad form in most circumstances. Your curriculum vitae is supposed to be a comprehensive description of your academic history. Technically speaking "brief CVs" are not really CVs at all. This is really a technicality, because by whatever name these "like CV's but briefer" documents are often used for various purposes, including posting on your website and for grant applications. In particular when you apply for an NSF grant you need to turn in a biographical sketch; unlike what you might expect this is not a brief vignette about your life story but is in fact a severely abbreviated CV, generally limited to two pages. What you put in this document is carefully prescribed by the NSF: your undergraduate education is one of the things they ask for. In general the length issue seems to me to be a red herring: how many undergraduate institutions will someone have? This information belongs on the first page of any CV; how many pages follow is less relevant.
Coming back to the general question, the purpose of a CV of whatever length is to describe your academic and professional history. Here are the two basic principles of (academic) CVs:
(i) They should be honest and forthcoming.
(ii) Subject to (i), they should paint the candidate in the best possible light.
If you don't include your undergraduate institution because you don't want people to know that information, then in my opinion you are violating (i). Someone who tries to hide such basic and innocuous information seems problematically unforthcoming by academic standards.
Then there is (ii): if you omit mentioning your undergraduate institution from your CV, then a lot of people are going to suspect you're doing this for reasons other than the ranking of the institution. Things that I would think of:
Maybe you didn't get an undergraduate degree at all. (This is rare but could be a problem in some circumstances. Or maybe you claimed to have an undergraduate degree to get into a graduate program but actually didn't. (Again rare, but crazy things have happened!) Anyway, these are things that people don't need to be worrying about if it is not the case.
There is something fishy or problematic about your undergraduate education: e.g. maybe your degree got rescinded later. If you don't list the institution, then we cannot even in principle investigate, and that's a cause for concern.
Maybe you are trying to hide how long you spent in school or how long you spent out of it. Although (at least in the US) your age is really not our business, we are allowed to notice and take into account if you spent ten years out of school in between your undergraduate and graduate degrees. When I look at candidates' CVs, I calculate the number of years in between the undergraduate degree and the PhD. People who did their undergraduate degree a long time ago are (I think) more likely to either be a bit less committed than the norm or unusually mature, decisive and experienced (in other words, it's bimodal). I also largely subscribe to the "real mastery takes ten years of hard work" school of thought that has been espoused in various recent literature, so if I can see that someone is, say, only eight years past their enrollment in an undergraduate program then I expect them on the one hand to be a little green and on the other hand to still be on the rise. If you spent ten years in industry applying your undergraduate work, then the learning curve is different.
Finally, let me say that even the premise of being embarrassed at having gone to a lower ranked undergraduate institution seems suspect to me. In the US, most people decide that they want an academic career years after they decide on their undergraduate institution, so having gone to an undistinguished undergrad institution is rather common even among top people. Moreover, most people view the undergraduate education as being distinctly "negative time". In other words, if I know that you got a PhD from a top place and then I learn that you went to a mediocre undergrad institution, then given where you are now learning about how far you've come makes you look if anything better, not worse. If you got your undergrad degree at Harvard or Princeton, probably some pretty good graduate program will take a chance on you even if you did not actually do all that well. However, if you go to Gonzaga University and then get admitted to a top program (I am not picking on Gonzaga but rather choosing a real life example of a high-flying collaborator of mine), then gosh: you really must be good.