I find it odd that a majority of users on here ban Izanami but not Izanagi.
Why ban something that can effectively counter a forbidden technique that allows users to cheat death at practically the same cost; losing an eye?
Well. 
From my personal experience it isn't really a realistic jutsu to perform on SL. When someone used it on me in a zone fight I just let it go so they'd lose an eye since back then it meant you lost Susano'o. The jutsu was not performed correctly though.
There's also the matter of it being a character control jutsu much like Kotoamatsukami, but not as bad. If you actually get trapped in an Izanami you just accept the results of your actions and escape it, your opponent can't argue that you don't do that, so the jutsu is useless. If they opponent was able to refute your resolve the jutsu would be god mod, so everyone just cuts out the middle man and says it is banned.
Accepting the results of your actions, however, would be nullifying Izanagi, meaning you would get hit by whatever attack you were attempting to quite literally god-mode your way out of. Accepting that you would get blown to pieces, for example, by Konan's specialty technique as Obito would get you blown to pieces, and Izanagi would be, in effect, countered.
It is only really impractical for SL use when you attempt to use it against an ordinary joe who is not using Izanagi. Izanami was created as Izanagi's counter for a reason. It was made to teach Izanagi abusers a lesson. Kabuto's situation would simply not happen in SL unless the character legitimately did not realize that they were in Izanami, or truly could not accept a certain detail about their fate (this even includes a victory if one were to go about it that way).
Looking over the tech descriptions in the series, in order to use Izanami properly against an Izanagi user, one would most likely have to have some sort of foreknowledge that their foe is attempting to Izanagi their way out. After all, at least one event would have to be recorded by the sharingan and stored for the purposes of creating the "loop". While a single event looping would be obvious, in a tight-situation, it would alter reality by altering the illusion that the reality is to be replaced by. By accepting, the target is hit. By not accepting, the victim stays within the loop, and the izanagi cannot alter reality as the user sees fit, thus still causing a hit.
This closely timed action would require the sharingan not justs for utilization, but for timing purposes. It would need to be executed immediately during the illusion-reality tranition in order to work.
As a result, Izanagi abusers would predictably use Izanagi whenever things did not go their way, so an Izanami user would have an easy time dealing with them because they could easily predict the usage of Izanagi. On the other hand, a Kabuto-Itachi situation would require an extreme arrogance or similar exploitable flaw in order to capitalize on, something Itachi would have never gotten had Kabuto not been so talkative in the fight.
So unless you use it against an Izanagi user (and you expect them to use Izanagi, so prepare recorded sensations at bare minimum a post before the main event) there is really no practical use for it in SL unless you capitalize on the brief interval in which the target must recognize the loop (hence, longer loops are best on targets who would be made aware of a loop by the looping itself, and not themselves would recognize familiar sensations and believe it an illusion, which in itself is unlikely since the loop doe not necessarily have to be the exact same scenario each time, merely the same sensations, which will be very close to an exact copy) to finish with something that they cannot so relatively easy get out of.
It is not character control like Koto because it does not allow one to control the victim without restraint. It merely forces the target to accept a certain fate, which is hardly a character control that is comparable.
