"The bitter soul over the cup of warm wine 温酒之恨 (wēn jiǔ zhī hèn)"
(Note: Hua Xiong was killed by Guan Yu 关羽 so quickly that before Guan Yu's wine turned cool, he returned with Hua Xiong's head.)
Why he is a Demon:
On one hand, Hua Xiong is an almost insignificant character in the entire story. You know he is not important by the speed at which he was killed by Guan Yu, no different from those nameless wrestlers who get trounced by the famous wrestling stars within 5 minutes.
On the other hand, Hua Xiong very nearly changed the entire course of history early in the Three Kingdoms period. The day before he was cut down by Guan Yu, Hua Xiong came very close to slaying Sun Jian 孙坚, and that could have distorted the future of Wu Kingdom 吴国.
In the story, Hua Xiong was credited as being a strong combatant, just shy of Lu Bu 吕布's abilities. I guess the need to let the heroes of the story (the 3 sworn brothers) took precedence and thus he appeared for a grand total of one miserable little chapter before his head was served on a platter. Wouldn't you be pissed if you were him?? Little wonder that he is one pissed off Demon!
Character ability: Decapitate 枭首 (xiāo shǒu)
Every instance that you suffer damage, you can immediately take possession of 1 equipped card from the player that is the source of the damage. You can then immediately give this equipment card to any player (including yourself) as an on-hand card or equip this card for that player.
Ability's relation to the story:
None! No relation whatsoever! Yes this is another case of "come up with some random character in the story to fit this wouldn't-it-be-cool-if ability". If you really insist, then fine you COULD say that Hua Xiong was decapitated by Guan Yu and there's your link, though the ability itself has little to do with decapitation does it?
Not exactly an ability that everyone would crave for, though maybe we just have not found a splendid strategy for him yet. One thing i can think of is to forcefully shove an Armor card into Younger Zhu Ge Liang's equipped area, thus removing the default Eight Trigrams armour he has on.