Way back in Season 1 — which, apparently, was only a year ago, Mystic Falls time — Damon and Caroline were a “thing.” And by thing, we mean he compelled her, used her as blood bag, and treated her way harsh, Tai. He also wiped her memories, which all came flooding back when Car transitioned into vampirism. Let’s just say her recollections weren’t as sweet as Damon telling her she deserves a love that consumes her and kissing her sweetly on the forehead.
Since then, Damon has saved Caroline a few times and backed off being uber-creepy towards her. But she’s obviously only seeing in the light of how he treated her. That’s her right and viewers would probably lose a lot of respect for the fierce vamp if she gave Damon a pass just because of Elena’s feelings for him. She finds Damon so repugnant that when Elena says she’s falling in love with him, Caroline spills the beans about the sire bond. It’s inconceivable to her that Elena’s feelings for Damon might be genuine.
On the other hand, when Caroline says Damon has never been right, ever, that’s not exactly true. Damon’s frequently the guy with the plan. (And he was right about April’s red dress.)
Now, some people think Caroline is being a tad hypocritical. She’s been flirting with noted mass murderer Klaus (Joseph Morgan), a guy who’s perpetrated unspeakable horrors for centuries. He killed her boyfriend before turning him into a hybrid. Still, it’s not clear how much Caroline’s interest in Klaus is part of her act to distract him. If it is genuine, she’s going to have some reconciling to do — though he’s never put her through nearly as much trauma as Damon did.
As José Molina, who co-wrote Season 4, Episode 8, “We’ll Always Have Bourbon Street,” tweeted, “C & D have a complicated sexual relationship, and she was Stefan's vampire padawan.” It's pretty clear why Caroline is rooting for Team Stefan.
By the end of of the episode, Caroline seemed ready to wave a white flag on her criticism of Damon. At least, for as long as Elena is in earshot.