personally I think this sounds more like just... a fundamental difference in how people who like villains/"bad people" vs people who like protagonists/"good people" view characters (to be clear--i'm making a broad statement here, I don't think everyone in either group feels the same about it or has a particular viewpoint)
the biggest thing, to me, is like... Neo is not a bad person. Neo is not a person. she has not hurt people, she has not caused real harm. she is a character, that has hurt other characters, and caused harm in a fictionalized setting.
I, and as far as I am aware also many other people that like villains, find nothing repugnant about a character that's done fucked up things in a story. I personally have found a lot of people I see that tend to only like protagonists and not villains, and have a really close attachment to those protagonists, can get genuinely upset, angry at, and hate characters that have harmed the protagonists or done something morally abhorrent. my assumption has always been that people like this carry such a close emotional tie to stories and media that they engage with that while obviously they know none of it is "real", they have an emotional reaction to things they find appealing or unappealing in a similar way to if these things were affecting someone they knew even tangentially.
not that people who do this are engaging in media in a childish way or anything, I just think it's a difference with how you can emotionally engage with media? like, personally, I just don't really feel empathy for characters and really struggle to emotionally connect to characters in general--the only time I'm going to get upset about something that happens in media is when it's something I think from a narrative or real-world standpoint doesn't make sense to include or is questionable, which makes me upset because that was a choice made by a real person that, to me, makes a narrative or story make less sense/less fun. when I engage with media I generally am constantly thinking of it as a story that someone is shaping, and think a lot about what their motivations or reasons for doing various things are. to me it seems like the way some other people engage is that they get more immersed in the story and think of it more as a whole world, and less of, like, words on a page that a person chose to slap down.
ALL OF THAT to say: I think some people get really emotionally engaged with stories and have a lot of empathy for characters, which makes them uncomfortable with the idea of liking or projecting onto a character that's done something morally abhorrent, and other people don't always emotionally engage as closely with a story and therefore don't find anything uncomfortable or upsetting to enjoy and engage with a character that has done something morally abhorrent.
I know there are people who really don't like villains that aren't emotionally engaged with stories, and people who really like villains that are, but I've never had a chance to pick the brain of either type of people so I don't know what that's about exactly LOL
but regarding liking villains, I personally think it's really fun to explore and engage with extremely fucked up and immoral actions + scenarios in fictionalized settings because I find those kind of themes really thematically compelling and they are often things that you either would not find in the same way in the real world, or are not safe nor humane to engage with in the real world and thus wouldn't be appealling in a real world sense.
and regarding liking NEO specifically. I personally liked Neo actually back in the Poser era days. I thought she had an interesting fighting style, she was involved with a lot of the big main villains, but she was really mysterious. we didn't know much about her personality, backstory, or dynamic with other characters. I liked that openness in her character because I personally really like the world of RWBY but don't like the story or most of the characters that much, so Neo was an easy opportunity to engage with parts of the world + characters I do like and explore more of the world + ideas I'd come up with since I could do whatever I wanted with her. I haven't liked Neo since she came back because obviously what she ended up being written was never going to be the same as what I'd come up with for her backstory and personality, and I just don't find what they did choose to do with her a compelling characterization at all. If I hadn't liked Neo pre-Fall I certainly would not have ended up liking her after she came back into the story. (post-fall I personally think she seems to lack clear character motivation in canon especially in V9 and serve more as something to conveniently activate pieces of the plot. I don't like that in RH she was written as coming from an upper class family and I think her personality feels both wishywashy and too soft.)
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