Why is Magneto such a great villain?

Perhaps the answer is simple: he is not a real villain. In many ways Magneto was a victim who was used by people who wanted to use him, or better said his power for their own synister purposes. Those manipulations led Eric Lensherr to lose things and people that were valuable to him and eventually develop this hatred for normal humans and also come to the belief that powerless humans were an inferior species. Mutants were Nature's next step in evolution and therefore should be considered a new species with a name of their own, Homo Superior. This new species needs a space of its own which is why Eric, seeing himself as mutants' natural leader, believes that space is being occupied by regular humans. Does this make him a psycho? Perhaps and then again perhaps not. Laboring for what you believe in cannot be called wrong; however, that innocents suffer because of your actions cannot be called right either. If Magneto considers it right he will modify the axis of Earth or inverse its polarity in order to accelerate mankind's ulterior destruction. In fact in one parallel universe the Magneto of that reality made a deal to spread a Zombie virus on Earth believing that the best mutants would survive along him while the zombified humans literally ate one another alive. But the virus acted too quickly and the result was unprecedented: the zombie superheroes united and eliminated everyone else, mutants or not. In the end, even Magneto ended up being eaten alive by a zombie Hulk and other zombie heroes. There was a mutant who was not eaten though, and that one was none other than Wolverine himself. But he was a zombie, too.