My memories of how the Eye worked are sketchy at best. I didn't have access to it until I got my singing steel helm after kunark was released. I do remember mobs killing it so I have to assume it was KOS.
I agree with the person who said bind sight is far more useful for scouting (is bind sight working on corpses yet? Guess I should log in and test that :P....because...you should be able to bind to a corpse - just bc it has dead eyes doesn't mean it doesn't have eyes to bind to! /derail)
I have used bind sight to successfully invite for cross zone COTH, to watch mobs path, scouting purposes, etc, etc.... BS was always far more useful than EOZ.
My opinion: There are undesired effects either way.
Non-Kos Eye of Zomm: too easy for cross zone COTH invites..... this can be achieved with bind sight anyway and I don't see why this is of particularly horrible consequence. it isn't an exploit and actually uses the spell in a useful, relatively non-detrimental way.
Kos EYE of Zomm: can pull using eye of zomm. could create situations as have already been mentioned - pulling stone spider to zone in (sol b), pulling phinny to zone in (kedge) (though that's sheer laziness. walk your ass back to the mob IMO)
How should it work? If you see a frog shaman's pet wandering around aren't you going to kill it? Very likely - yes. Because you know it's not a players pet or a "friendly" unless it's the pet of some faction that is not KOS for you (you aren't going to ruin faction in your hometown unless you are dumb :P )
So it makes sense that if a frog warrior in sebilis sees my eye of zomm wandering around he's gonna kill that eye then come looking for me before I go looking for him. It's self preservation.
I feel like it is inconsequential either way because this is a small thing....but we all know there are always going to be people who feel very passionately on both sides
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I think the real question is - which way is more game breaking?