In response to "Bring on the Bad Guy" from The Escapist Forum: I'd say that the Early rule doesn't always have to apply. I've never wanted to tear a character apart more than in Jade Empire and you're over halfway through the game once you reach the point where that villain is revealed.
If you can avoid telegraphing it, I'd say a betrayal of some sort is a great way to make the player truly hate the villain. Of course, it happens so often now that it has become a bit cliché.
My favourite villain from Mess Effect was Sovereign. The exchange between it and Shepard on Virmire was chilling. Not much about Sovereign was revealed until Mass Effect 2, but it just goes to show that sometimes a single conversation can really set a scene and establish a bad guy.
I'm reminded of a scene in the film Assassins. Where Antonio Banderas' character is in the back seat of a cab which Sly Stallone, who he is trying to kill, is driving. The bulletproof glass screen prevents either one of them from really doing anything to one another (although Banderas fires a shot).
Putting the player in such close proximity to a villain but having something in place which prevents a physical altercation can be an effective way to build up the bad guy.
In response to "The World is Out to Get You" from The Escapist Forum: That is certainly an amusing point. I can't even begin to count the number of times I've careened into Jagged Rock Junction, or down a pit, or into lava/acid/purple cloud stuff over the years. Or when traversing a rope line to jump off too early and miss the landing by a couple of micrometers, or jump to a platform that looks safe only to discover that there was a hidden trap. Maybe my timing was off, maybe my jump was just a few degrees off, or a second too early, and whoops, there I go making another stain again. Maybe I was running across a building top, jump off the edge and leap to the next building, but misjudge the distance and land face first on some poor sod below me who apparently is composed of motile reinforced concrete. Maybe it's the random bit of wall that juts out in an infested corridor that seems specifically designed to bounce my strafing-thrown grenades right back into my face, or that bit of ceiling that seems to pop down right as I jump up and try to launch a rocket at someone across a room, only to realize that a half-foot radius is no where near enough room to dodge an exploding rocket and end up launching myself back to the ground, in a multitude of little bits. Truely, the environment is out to mash us into little gibblets.