Ahh, I love demon characters. Not so much the red-on-black powerplaying ones, but legitamate demon characters are amazing. Personally, I have two. My rule for demons (for my own characters, do what you want) is to base them off ancient lore, Biblical texts, grimoires, or traditional sorces. (Like Dante's Inferno, Paradise Lost, Divine Comody, whatever))
I'd also advise against making them steryotypical "bad guy" villans, and personally, not 'insane' as it can be considered (rightfully) as quite rude and moreso because it's a writing cop-out.
My two are Lucifer, who I based almost soley off Paradise Lost, and is a smaller, whiteish-goldish color with slightly pink toned markings, as I personally prefer the idea that fallen angels still resemble their heavenly counterparts. He's more of a politican than anything, and a regular wolf could probobly beat him in a physical fight no problem. He does have a couple pf limited powers, but he's next to nothing without his army. My other is Mammon, who was mostly based off Dante's Inferno, and is a dark brown wolf with one pitch black eye and the other gold. He's pretty old, fat, and lazy.
I agree with what Escalade said about tagging them. It's a little pointless in my opinion (that's what bios are for) although I have considered it, as most people don't seem to realise my demons are demons at all. (Lucifer espcially. Actually, he's been mistaken for a girl quite a few times.)
As long as you don't power play and are a decent RPer, I'd say they're fine to make as characters. I've never been able to find a good RP for one, though. Most players either ignore them or hate them.