So, two possibilities here: 1) The experiment really was emotionally taxing and humans are really fragile 2) When it comes to certain narrow domains, the IRB standards are hyper-cautious, probably for the purpose of avoiding PR issues between scientists and the public.

I'd say it's some measure of both. According to my professor, the experiment was particularly emotionally taxing on the participants, but on the other hand, the IRB is somewhat notoriously hypervigilant when it comes to procedures which are physically or emotionally painful for test subjects.

Even secure, healthy people in industrialized countries are regularly exposed to experiences which would be too distressing to be permitted in an experiment by the IRB. But "too distressing to be permitted in an experiment by the IRB" is still a distinctly non-negligible level of distress, rather more than most people suspect would be associated with exclusion of one's virtual avatar in a computer game with no associated real-life judgment or implications.