Manual transmission is fantastic for many reasons, and one of the top reasons (in my book) is the ability to slow down ahead of red lights without touching the brakes. (And, incidentally, it is to my chagrin that most North American drivers never know the joy of driving MT, which means that the 1% of us who do must also forego it at some point.)
And so I'm a bit puzzled when I hear that lugging the engine is harmful.
I've routinely used engine braking with no harm, and so, empirically at least, I know it's perfectly alright. To be clear, I would never slow down by down-shifting and slamming the clutch. I would simply remove my foot off the gas pedal, slow a little, then shift by one, and never more than one, gear down, and gently ease into it, and so on. Often enough, lights would turn green and I would not even need to touch the brakes—plus I would have saved momentum. If this is flawed thinking because I am extending the life of the brakes and saving a bit of gas by putting extra stress on the engine, I've never felt that it does (reduce engine life).
When does slowing down by down-shifting become lugging an engine?
(Or, put more simply, suppose I make certain I never drop below, say 1200 rpm while engine-braking, could I still be lugging the engine? Already at 1500 I can hear and feel that the engine is heading towards stalling, and so I get plenty of warning to keep the rpm up.)
Aside: Nightmare scenario
It's worth adding that there is one exception to the never-more-than-one-gear-down rule. I've never done it, but I keep thinking that one of the many benefits of having manual transmission is that even if the hydraulic lines of the brakes suddenly fail and I lose all pressure, I would still have a chance of surviving a nightmare ordeal by slowing down using, say, second gear while driving at highway speeds. The transmission would almost surely become metal shards, but I would at least have a better chance of surviving.