Why does bad Busybox installation in /system/xbin/ cause problems?
Well, don´t know a thing about android, but I have read about other people with that problem installing Busybox.
One of them said that some components of Busybox were already installed in his /system/xbin, so probably some phones comes with files in that path that Busybox overwrites, making the phone unstable or bricked.

You should search info about installing busybox in your device before installing it.