The money and drugs at Atari were apparently legendary. When Warner came in and tried to run it like they were used to running everything else, there was much friction and that's when Atari started deteriorating (leading to Nolan's departure). This is where those well documented poor decisions came into play: letting the VCS stick around way too long, releasing "obvious betas" (read: Pacman) and poor quality, rushed titles (read: E.T.) and treating their programmers like nobodies (paving the way for the third parties - some good like Activision, some horrible like Ralston-Purina... seriously.)
You know how they say in some games going first is a disadvantage - well that's what it was like for Atari. It's hard to be too critical, there was no precedent in the industry. But still, Howard is correct - they did almost take everyone down with them. They were originally approached to distribute the Famicom in America (this was before Tramiel). The deal was soured because some Atari exec lost his temper at CES when he saw Donkey Kong displayed on the Coleco Adam (Atari had exclusive computer rights for that game). Imagine that hadn't happened and Atari handled the NES knowing how well they handled the VCS in later years, not to mention the 5200, 7800, Lynx and especially the Jaguar.

When Tramiel took over, as far as everyone knew, home computers were the way we'd all be playing video games. Why buy a console when you can do the same on a machine that can also handle the finances, homework, etc.? No one was expecting Nintendo to revive the industry in America like it did.
So yeah, Tramiel was a ruthless bastard - but he was definitely no dummy. Save for the arcade division, there was practically no more "Atari" once he stepped in. As Howard said, he saved the valuable IP (still a recognizable name before we all started calling video games in general "Nintendo".) Perhaps he deserved that Swordquest sword...
I'm not familiar with a lot of the animosity towards him (except from those who dealt with him directly, of course), though I do know the internets have been making fun of Sam Tramiel for being completely batshit insane when he was promoting the Jaguar:
http://www.defunctgames.com/theysaidwhat/23/ataris-sam-tramiel-goes-freakin-crazy