Hey DIN., nice tank. If you try altering a few,(just a few) pieces of your lr near where the damsel spends most of his time it usually disoreints them and they back off the aggressive behavior. I've got a yellow tail damsel , but i added him last for some color and I knew he would not really bother a royal gramma, sixline wrasse, or tomato clown. In terms of fish, I really like a royal gramma for color. They are territorial, but won't go any further than flaring open their mouths like the post above. Really cool to watch. My tomato clow sees this and still gives him a laugh and a fake like he's going to rush him. The tomato takes no crap. A sixline wrasse is great. I like a lot of rockwork and it appears that you do to. A sixline would spend all day weaving in and out of the rock. Great fish. All of the clowns look nice too. Some are more agressive than others though. Tomatos and maroons are the worst, yet my tomato stays largely near his anemone and doesn't start troubel. He just likes nailing me when I get into the tank. Try rearranging a few pieces of lr. If that doesn't work, place something in your tank that will check his behaviorlike a royal gramma. He'll scar the crap out of the damsel, but not much more. Your problem is that the damsel, although not aggressive by most damsel standards, thinks it is his tank because he has been in there longer and was the first.
Good luck.