Why is the Honda rebel 450 rare?

Honda only produced the Rebel 450 for 2 years. (1986/87)

Rumor is.....They stopped producing it because they were sued by Harley Davidson for making the bike "sound" like a Harley??

No, They quit because they did not sell enough. The Harley claim was about "dumping" or shipping them below cost and thus an import restriction was temporarily placed on bikes over a certain size. So it was a trade restriction not a lawsuit that happen. However Honda did not sell lots of the 450s and drop the model at that time.