I was on a panel interview.
Should you be "nice" or objective when giving feedback within the team? To put some context, this feedback will be in written form on an excel spreadsheet.
What is the proper decorum?
What's your role on the interview team? Presumably you were included to evaluate the candidate relative to some specific area, skill set, project, etc. The best thing to do is to be honest, objective, and specific. Evaluate the candidate from the point of view that fits your inclusion on the panel, or if that isn't clearly specified, from the point of view that fits your relationship to the position.
If you're unclear of your role, or the specifics you're supposed to be evaluating, it's reasonable and appropriate to ask for clarification from whomever arranged the interview.
Being "nice" provides no value and may actually cause problems. If you have specific feedback but don't share it because it's critical in nature, and the candidate is hired, there may be performance issues you could have prevented by sharing your feedback. Or to look at it another way, the company may pick this candidate over someone better suited for the role because you didn't provide meaningful input.
Should you be "nice" or objective when giving feedback within the team?
What makes you think this is a binary choice? You can be objective, and still be "nice". Even if your feedback results into a negative advice of hiring, that does not imply it is not nice.
"Nice" is mostly how you phrase things. It does not imply you shouldn't give feedback on what you're supposed to give feedback on.
Suppose you have an interview, and you're expected to give feedback on the candidates knowledge of a programming language. And suppose the candidate does not show (s)he has much knowledge of the language. Giving feedback like "the candidate is incompetent" or "the candidate should never be allowed near a keyboard" is neither nice, nor useful. Feedback of the form "the candidate did not show she understands how objects work" or "the candidate could not explain how to write to a file" are objective, and are not "not nice".
And don't forget to always include a few positive points in the feedback.