Can a helicopter be "stalled" by pulling too hard?
About High Energy Maneuvers in a Helicopter: not quite like fixed wing flying


  ... if the player banks the helicopter then make a sudden and
  hard pull on the cyclic to make a turn while max collective is
  applied, the low rpm warning will sound, followed by a loss of
  power and a few seconds later loss of attitude control.  


I don't understand what you mean by "loss of power" here (engines are red lined and don't produce any more power?) ... but to proceed


  The aircraft can be recovered by:(recovery steps)  


While the recovery steps are rational, the point is to not wait that few seconds if you droop Nr.  I am not sure if the simulation is trying to model retreating blade stall or not, but the response to droop in a max performance maneuver cannot be delayed.   

With max collective and a maneuver that induces low NR you don't wait: you reduce the load on the rotor head.  You do that because the engines aren't able to keep the rotor turning based on the load you've put on the system.  If you keep the load on you just make the problem worse.  (In that regard, the simulation is more or less faithful to real life ...)   


  My guess explanation is as follows:  


1. When max collective is applied, the blades are working hard by cutting air at a large angle of attack
Yes.  Higher angle of attack.
2. When the aircraft is banked and aft cyclic is applied, the airflow relative to the aircraft is like when it is in a very high rate descend
No. Not the same.
3. The critical angle of attack is exceed on the rotor blades, they stall and cease to produce lift
While technically true, the reduction of Rotor RPM (Nr) is your cue to Stop Doing That! (whatever "that" is) so that Nr does not decay further.  Note that the retreating blade will tend to stall first, which is a different stall mode than a fixed wing aircraft stalling due to high AoA.
4. Due to the greatly increased drag, the main rotor is unable to keep rpm up with its power, therefore rpm decreases
It's the Engines that can't keep the rotors turning that is causing the Nr to droop ...  and that's due to the loads you are putting on the drive system.
5. As rpm decreases, less lift is produced and the stall worsens.
Less lift is produced and you may approach the stall rpm (somewhere around 70-80% of rated Nr depending on the helicopter) if you don't do something to restore Nr.  That means lessen the severity of the maneuver and stop overloading your engines' ability to keep the rotors turning as soon as the Nr droops.
6. By reducing collective, the drag of the blades is reduced, and rotor power is enough to keep rpm at normal range again.
No, the Engine Power is enough (or becomes enough) to keep the Nr in its proper range, but reducing collective is a key first step (as is leveling the wings) to retain control of your rotor system.
Is my explanation correct?
No
Can this happen in real life?
Flying a helicopter like it's an F-18 in a Blue Angels flight demonstration is a good way to kill yourself.