The problem with the Yellow Tail Damsel, from my personal first hand experience, is tank size. This fish is very similar in behavior to a Banded Coral Shrimp. In the proper size aquarium, they are generally very peaceful. However, when you stick them in small quarters, say 29 gallons or less, they become territorial and aggressive to new additions.
Some of the stories you hear are also due to the "cycle" process. All fish become much more aggressive during the cycle and the Yellow Tail Damsel is often used for cycling.
Finally, there are 4 or 5 different species sold as a "Yellow Tail" Damsel. When you hear stories on the internet, you can't really be sure if it is the true Yellow Tail, such as the one pictured above, or another more aggressive variety.
Agree mostly with you Pasfur. I think that the behavioral limits of various fish is really the main limiting factor when to comes to stalking these days with the vast improvements that have been made in filtration, ect. I agree that you should have a proper environment, not only for the yellow tail damsel, but for any marine creature. Our tanks, even vast ones like my main 1400g system, are so minimal when you are comparing the quantity of water to the environment these creatures come from, we need to be sure to adequately provide for all the needs of our pets. Often I think that the stories we hear of "Attacks" by this beautiful fish is often the fault of the owner; either though putting two species are compatible together, putting a fish into too small of a space for it's needs, ect. If you do it properly, you can discover the true beauty and nature that the yellow tail damsel adds to any reef aquarium. I would never discuorage anyone from steering away from this fish; unless under unique circumstances.
Like I said earlier, often these "horror" stories are the cause of the owner, and you need to do things right the firstime around and know all aspects of what you are talking about before you go and try to influence others away from a species based on a bad experience that you had; when you didnt do it poperly. Research is key in this hobby; the more the better! There is always more to learn, and dont be afraid to ask!
Sorry for the lengthy post, but I wanted to be sure my point was fully understood