I personally keep no ships in NY as a policy, but visit occasionally to plunder its resources. The no-kill rule is a standard practice for FL servers, from what I can tell, and makes a familiar starting ground for players new to the server. I had been killed a few times in NY myself, before the damage-block was in place, but I never felt threatened, even as a freelancer, because most players respect the rules.
The biggest risk is that if the damage-block is lifted, then unscrupulous players may exploit the general rule to kill stores, and steal their contents. There would be no recourse for the victims, and a ban on the offender might be the only remedy, since such people also use F1 to escape justice. But at least, players who are in hot pursuit of their adversaries could in fact get satifaction, even if their target runs to NY. It would be nice if we could get the damage-block to only affect ships under lvl 50, but my guess is that this would not be workable, or would add to the already considerable server load.
So as long as we are strict and consistent about enforcing no PvP for players under lvl 50 in NY, I would be in favor of removing the damage block, to root out the cowardly miscreants who would take haven behind the block...