As far as I know, it doesn’t have any other issues that require it to be a banned item.
Red Potions are unobtainable outside of special seeds, and it’s extremely annoying constantly picking these up from chests, holding them for half a second by accident, and getting frozen for 14 seconds, usually meaning that you will die if there are any enemies around you.
There is currently a bug where you can quickswap to the potion and drink it before it freezes you, making the potion an infinite source of buffs since it also regenerates, and unbanning the potion should solve this issue.
If you so happen to try and pick up the potion and drink it from your inventory, you will get softlocked, causing you to have to rejoin survival to try and fix it.
I feel they should be unbanned because it makes special seeds more fun, and they cause more problems than if they weren’t banned.