Does USB tethering degrade droid batteries? I want to know if tethering with my Xperia Neo V via USB will affect the battery capacity in any negative manner other than the usual.
No. There's no relation between those two things. 

If you connect your phone via the USB it gets charged. It doesn't matter if you don't use the USB connection at all or transfer files or tether your data connection or do any other stuff while it's connected.

The charging circuit doesn't even know that it's connected via USB and that there's data flowing. It just happily charges the phone with the power supplied via USB.

Side note:
The battery (LiIon) degrades over time, if you use it or not. There are however differences in the speed of degradation, depending on usage, storage temperature and charging state (best is around 60-70% charged as far as I know). This is however the usual degradation which you asked not to factor in. And this degradation definitely doesn't change if you tether or not.