There is no line regarding AE and what is accepted and what is not accepted, you should use common sense.
That being said, the number one reason that people give when confronted with the way they use AE is: "Well the game let's me do it, that's why I did it." Since exploits can fall under those exact same reasons, and we ban for exploiting, let me try to explain the issue with AE so that those new to how it works (as well as long term users) can understand some of the DM stance.
I have two issues with Animal Empathy. 1. It does not use Empathy, it dominates. Dominating is a magical ability and/or spell, not a skill check. 2. The skill rolls are rigged, because most people will get a natural 20 unless spotted by a hostile animal due to not being in combat, allowing for the maximum HD animal each time. This implies little to no risk against the PC, and I am all about the risk to a PC when going for a reward such as that.
1. This one is fairly self explanatory for the most part. You get a free pet that attacks anything in your path. Why is this wrong? Go out in real life, sneak up to a dog, then lunge from the bushes and hug him. Even if you are "good with pets" the dog isn't going to like it. Especially if it's a mean dog already who was growling and snapping at people. If you're lucky, he'll calm down, if your not, he'll rip your face off. He will not suddenly heel to your side and follow you everywhere and attack those you point at. Seriously, I'm not lying here.
2. Narfell already has modified rules regarding animal companions at low levels. You can't get a bear until level 4. But with AE you can get a bear at level 1 with enough points. We don't let you get the bear companion because it's deemed to be overpowered, why would it be alright to get a bear at level 1 using a skill check?
So, the next question would be, "Why is it allowed then?" Because AE in theory is a wonderful tool for RP. You can calm animals, and try to pacify hostile growling beasts. People have been lucky that over the years there have been a number of people that RP'd it so well, that it was deemed to be worth more in then the alternative, which is to have it removed.
NWN has it scripted to act the way it does, and for the most part, here and there, we ignore the extra companion bit, because it does give a little padding, and it does involve putting points in something. So when does it become over the line?
This is what I personally watch for. If someone enters an area that is well above their challenge level, and immediately sneaks up and AE's an animal. That's a warning to me. If they then proceed to use that animal to clear the map stopping only to haul said animal to an out of the way place to "put it out of its misery" before getting a new animal, that is over the line.
If a group's "plan" for a map is "we'll have the ranger/druid AE a tank" and that's pretty much it... that's over the line. If there is no RP involved especially so. If the removal of the one AEd animal so far tips the scales that the entire party would be wiped, then chances are you should not be doing that.
As rangers/druids your character should be respecting animal and plant life as much if not more then your own PCs life (yes, I am sure there are some few exceptions), but forcing an animal into combat until it's almost dead and then killing it in a quiet corner -will- take explaining.