Is this way too good?

It's definitely strong, but looking at other similar cards it looks ok (for rare). cf. http://gatherer.wizards.com/Pages/Search/Default.aspx?sort=cmc+&text=%20[other]%20[creatures]%20[-1/-1]

I like the flavour, that's just right for a dementor.

I think it should be "other creatures" or "non-[type] creatures" for flavour and comprehension reasons. And nowadays I think wizards would be more likely to make it "creatures your opponents control" than "all creatures".

The only other thing worth mentioning is that this might be a 'Legendary Only' abilty. After all, Night of Souls' Betrayal, Crovax, Ascendant Hero, Ascendant Evincar, and Elesh Norn, Grand Cenobite are the only cards I can think of which house this ability without triggering it, and none of them can be on the table in multiples. I get the impression there's a reason for that.

That said, Dementors aren't legendary. Tricky problem. The answer might be to just hold onto to this design for another card and start again on this one...

­Curse of Death's Hold also does it, and that can exist in multiples just fine.

Ah, yes! It's only for a single player, but close enough.

You could also consider something like, "when this attacks, creatures defending player controls get -1/-1 UEOT". Even if it's not necessary for balance reasons, it would be quite thematic.

Fixed.