The main reason for that is that the series still has quite a few redeeming values, the first being the opening. The theme song "Lilium" is absolutely beautiful: a slow, almost pastoral piece of music with mysterious lyrics in Latin, which instantly conveys a gloomy mood. The visuals during the opening are a blend of perfect animation and high artistic quality, combined with a symbolism that can only be described as "haunting". The initial impression of Elfen Lied is so much of a mystery drama that you're basically expecting this to become an intricate, confusing story.
Of course, the very next minute, the series surprises you with a multitude of ultra-violent action sequences. People are literally torn apart, blood sprays everywhere, characters are introduced as cute and cuddly only to die horribly mutilated during the next scene. In Elfen Lied, those deaths can happen during the most peaceful and tranquil moments. Everyone can die, true evildoer and innocent bystander alike, and you're almost grateful if people die quickly for a change and not enduring horrible pain up to their final breath. And these are just the violent moments–in the flashback episodes, things are becoming even more disturbing as the series slowly reveals the common past of Lucy and Kouta. To some extent, I was reminded of Narutaru, only with the difference that this time, there is a hands-on motivation for all that bloodshed.
All of this is conveyed nicely by the seiyuu, most prominently the voice of Lucy/Nyuu, Kobayashi Sanae. You wouldn't believe that both personalities are spoken by the same person; she does a splendid job of portraying both aspects of the murderous woman. The other voice actors don't slack off, either, and both Kouta's seiyuu Suzuki Chihiro (best known as Arima Souichiro in Kare Kano) and Yuka's seiyuu Noto Mamiko (known as Elsa in Gunslinger Girl) carry the strong emotions of their characters almost to perfection.
Unfortunately, the good things end here (yes, the overwhelming violence is one of the good things). Whenever a female character has more than three lines in a single episode, chances are you're going to see her naked. Full frontal nudity is a common thing in Elfen Lied. This wouldn't really hurt the series if it were explained or at least appropriate. Unfortunately, it is not–women are naked whenever the script thinks they should be, especially when they are mutilated or killed. Yes, it's that bad. First you get to see their boobs, then you get to see them die. Snuff movie, anybody? Maybe the series tried to take a page out of Quentin Tarantino's book; unfortunately, they didn't choose a good one.
The weirdness doesn't stop at the mixing of nudity and gore–Elfen Lied even manages to crack a few jokes on the ever-present violence. Someone gets her legs torn off? Hey, let's make a joke about legs that fall off later in the series! We have someone with a serious psychological trauma? Let's give her a few weird dreams and hallucinations everybody can laugh about even if the dreams are terrifying as hell to her. That's just tasteless in my book. And then there are some weird reactions from people to show how cold and uncaring the world is, which are so far from realistic human behavior ("Oh, thank you a thousand times for saving my little dog. Now bug off, you stink!") that it hurts to watch them.
All of this would be forgivable considering Elfen Lied does a great job as a mood setter if only the initial mystery–where does Lucy come from–had any relevance to the plot. Unfortunately, it doesn't. Essentially, the series is a love story between two characters separated by sins of the past, and everything else just isn't important. Even the ending which tries to offer a last moment of shock and surprise doesn't work any longer as soon as the relationship part is over. Maybe the creators decided to do it this way to clear the field for a possible sequel, but it's still a weak conclusion.
All in all, Elfen Lied is only worth watching if you like nudity, extreme violence and/or a combination of both. This anime is not for the squeamish, and it's definitely not for children. Watch at your own risk.