It looks like a huge bristle worm to me and not the good kind of brisstle worm either.
I had one about 2 years ago in a previous tank that would be about 4 inches but stretch out to almost 8 inches. He was nocturnal and I found him because something ( I cant remember what ) in my tank was suffering at the time.
At that time I had a crushed coral base which he would hide in as well as a hole in the rock that he sometimes hid in He was a hard sucker to catch and I got rid of him
Looks like a seaworm that we use to catch flounder and stripped bass in new england.
Very nasty sucker they actualy have big pinchers in there mouths. If its the same thing
I would agree with the previos post. The animal in the picture is almost certainly a Polychaete worm. Certain temperate secies are known as bloodworms to fishermen (on the East Coast of the United States anyways). And yes, they can and do bite if you stick your finger in their mouths.As for compatibility with other reef organisms, you got me. Most of these worms are intertidal dwellers. I have never seen one on a reef (which is not to say they don't exist there).