Work of art
Ah, the glorious needler. For me this is the most fun to use. It's great the way the needles home in and bury into a target, and even the ftt-ftt-ftt sound of firing is satisfying. You can just tell from that sound that the enemy isn't gonna like this one bit! Revel in the victim's agonized comical reaction as he realizes he's about to go up with a bang. The subsequent pink explosions look and sound superb - my favourite sound effect in the whole game - and creating them is almost addictive. All in all, the needler is a work of art. I've occasionally seen people write it off as a weak weapon to be avoided, but all I can think is that they simply haven't taken the time to learn how to use it properly. Used well, this thing is lethal, quite apart from its entertainment value. Maybe some of the following advice will help.
Sending in isolated needles is usually going to be quite ineffectual. For the most part you should be trying to send in well-focused streams that will take out enemies in nice crisp explosions. The technique of thrust-firing is particularly recommended for that. Drill those needles in! Normally you should go for targets that are either fairly static or moving towards you. It's usually not worth firing on enemies moving across your line of fire, as the needles are likely to miss.
The needler's biggest strength is in being a devastating Elite killer, by sending in enough needles for an explosion. Elites can be pretty good at dodging the needles (it's certainly easy enough to dodge them yourself), but you can make it much harder by aggressively thrust-firing. Taking out Elites this way is all the more easy when they're running at you, as they often run straight into the oncoming stream of needles, making it all the more likely that a critical mass will enter before they start trying to dodge. Red Elites are better than blues when it comes to dodging, however.
The needler is a bit on the slow side for close-up fighting, but can certainly be used to explosively dispatch an Elite if you can surprise him at close range, or if he's charging you. Using a quick thrust-fire burst, a critical mass of needles can be buried into him before he's had time to open fire. If you get it right, all he's got time to do is growl at you before going up in a pretty pink cloud. Another technique is to get right up close to tempt him into a swipe (or maybe he's already up close, having surprised you). As he swipes, backstep while firing, and BOOM! - no more Elite. Just make sure you're not too close to the bang.
Exploiting the blast with groups
Because of the explosive effect when enough needles accumulate, nearby enemies can be damaged by the blast too. For this reason it's especially good to use on an enemy within a group, but should be avoided when the enemy is mixing with Marines. The needle bang will also set of any dropped grenades nearby, so that's something else you can try to exploit.
Fast switching for multiple kills
An advanced tactic you can use against a group of enemies, particularly Grunts, is to quickly switch from one target to the next as you thrust forward, with only the slightest pause if any to adjust aim between bursts. This way a single clip can explode two or three enemies in one smooth action, which should really give you a warm glow. It's a great tactic to use in megabattles, where you've often got multiple attackers coming your way. I especially use it a lot against Elites when executing a Far area defence in the rockslide megabattle.
Enemies with needlers are very little threat once you've become an able mover, though the special ops Elites and Grunts use it more aggressively and deserve a bit more respect. It's usually pretty easy to dodge the streams of needles. Go to one side as the stream arrives, and arc forwards inside the homing curve.
In fact, if there's plenty of manoeuvring space, you can pretty much ignore a needler-wielding enemy in order to concentrate on other threats first if needed. Even if he moves around you, you can remain aware of where the needles are being fired from by peripheral vision and sound, and potentially still dodge most of them. There's perhaps not much call for that level of dodging in standard Halo combat, but in the far more intense rockslide megabattle there'll be times when you've started to get flanked or surrounded, and there's no time to deal with the marauding needler guys because there's a red Elite gleefully drilling you with piping hot plasma, much to the amusement of the accompanying Grunts and Jackals who are beginning to join in! In situations like that, good dodging skills can be a life saver.
Occasionally a needler-wielding enemy will pause to reload, which is an ideal time to strike of course. The Grunt reloading animation is rather cute, not that this should stop you rudely interrupting the little devil!
If you love the needler, you'll have a complete ball with level 2's Arc of death. It's easily set up, and it's needler heaven! There are also some great situations for it in the rockslide megabattle, notably the Far area defence, Top pass defence and Plateau alley defence. In the confined environment of the spiral path megabattle you've often got lots of enemies heading straight for you which is ideal; and in the twin bridges megabattle the needler is great fun in a platform ambush.