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Just as a heads up, I'm simply thinking aloud at the pros vs cons of playing both C:CSM & Daemons as Battle Brothers. Feel free to post your thoughts on the matter.

First off, I know it's been beaten with the ugly stick a thousand times. Why did Demonic Instability have to prevent these two armies from being able to form groups together? It makes me depressed thinking about how one of the only lore-wise Battle Brothers in the game that actually makes sense, can't even form chaotic groups together in a single army due to this monstrosity of a rule. I mean, the lore & alliance testers who wrote the BRB should have been beaten with the rulebook they collectively worked on. Tau and Eldar? Really? Last I checked Eldar were pompous douchebags who believed they were better than everyone. Tau don't ally unless it suits their needs and this grim dark tale of these evil Piranha are terrifying when they actually do. Their allies are essentially fodder, and they think nothing about "Accidentally" blowing them up or "Sterilizing" them whenever possible. Why are they Battle Brothers? common jerk-ness?

Here's my gripe.

Daemons and Chaos Space Marines have a lot of unique units that really don't have singular synergy in their own Codex. I look at the Juggernaught Lord. Chaos Space Marines have Spawn and Bikers that by basic rule of thumb, become wound absorbing forms of saturation. Spawn barely get to the end game fights because of their lack of armor and invuln saves. Bikers of Khorne just flat out die. I would have loved to have been able to put my Jugger Lord with a group of Blood Crushers of Khorne. And it PAINS me to see that I can't. I've had opponents ask me, while we sat and talked tactica after a game, why I don't put Jugger Lords with Blood Crushers. I have to sigh and say "This is the only reason-" and hand them the Daemons Codex so they can read Daemonic Instability. I haven't had an opponent NOT answer with "That's just stupid" yet.

I look at things like Chaos Sorcerers and think to myself, "Wow they would be fun in a group of Screamers!" then quietly pout in a corner because I know the day will never come. I mean, why even bother allowing similar upgrades on characters (Juggernaughts/Steeds) if you can't even let them join another friendly factions groups. They're Battle Brothers! If you could make a list where your Chaos Space Mariens & Daemons would be able to actually join each others groups, what would you make? (Group Wise) The Juggerlord + Bloodcrushers would be a given for me, I love the models and CC to bits. I would also love to see Daemon Troops inside Land Raiders. Look how aged the poor old Blood Letters have become because of the Daemons Codex lacking ANY FORM of transport. Putting these guys in a Land Raider with Abaddon would make for some of the best CC phases. Or if really pushing for fluff (Which I would rather have) Force that an allies Transport, Rhino or Land Raider, NEEDS to have Daemonic Possession in order for the allying faction to use it. Bring some bloody fluff back to Chaos!

For several editions now, the Eldar have been portrayed as very positive towards the Tau, that is why they get Battle Brother status. It has nothing to do with CSM and Daemons not being BB, though.

My guess is they wrote the Daemonic Instability rule, tested it a bit, refined it and were pretty happy with the end result.
Then someone piped up asking how does it work with a non DI model joining the unit and realised they would need to either rework it or write a paragraph clarifying the situation and so said screw it, no joining.
It's a bit of a balls but in fairness it does reduce the complexity, I just wish all Allies worked that way.

Wouldn't it either be "CSM and Chaos Daemons" or "C:CSM and C:Chaos Daemons"?

Naming conventions aside, I agree with the sentiment. Its really really stupid that a Tau buff commander can join UM centurions, while a JugerLord can't ride with 'Crushers. Makes no sense at all, IMO.