Julian, I am in general agreement that the persecutions have been exaggerated but what advantage would a Tacitus (among others) have in describing the persecutions under Nero? If Christians were still generally disliked in the time of Tacitus (which I doubt anyone would readily disagree with) how would it benefit the propaganda theory. We have little choice to take some of the events at face value since there really isn't anything to tell us otherwise.
I agree that the descriptions of the persecutions are likely enhanced, and Nero's agenda was probably not so much to punish Christians as it was to redirect public disapproval, but to say it didn't happen at all is just as speculative. Tacitus may not have liked Nero, but Rome in his era was still not fond of Christianity either. Would there have been enough of a sympathetic reaction in the late first and early second centuries towards persecuted Christians to actually damage Nero's reputation any more than it already had been?