Vanity, selfishness, pride, competitiveness....all of these get an unnecessarily bad rap. There are appropriate places for all of these. Just like everything else it depends on what degree it controls your life.
What is wrong with vanity? In proper proportion to other things in your life there is nothing wrong with vanity. If it results in you staying motivated, focused, healthy it is a good thing. If you find yourself doing a million bicep curls but can no longer find time for functional fitness, then it is a problem. If you start working out so much that you neglect your family its a problem. If you start to ignore health cues then it is a problem.
Otherwise what is vanity. Taking care of one's outward appearance to make it reflect your inner self. Keep it in control and like every other aspect of being human, it can be a positive.
MTA: and is not denial of vanity a vanity in and of itself. "I dont work out to look good, I just want to be healthy ( I'm superior to those who workout to look good)"