The best uses of tragic villain backstory I can come up with are those of Mao from "Code Geass," Tetsuo Shima from AKIRA, and to a lesser extent Cyrus from Pokemon DPPt (though in this case it started out as amazement that a Pokemon game contained a villain with any complexity at all). They work so well because they make you say, "that's so horrible it's no wonder he became a villain." The best Freudian excuses, to me, make you question whether YOU would have turned out any better in those situations--and that doesn't have to involve copious amounts of suffering on the part of the villains, if you really think about it.