The react does indeed work as long as the targeted opposing dude is in the shootout.
I think Bithlord's point was that your opponent might just send the dude you targeted home after round 1. You can try to mitigate this by targeting their key stud - if he's leaving the shootout they were probably bailing out anyway.
That the react boosts your "shooter" rather than a particular target makes it very handy. For example, in Law Dogs Tommy Harden is normally a ho-hum 1 stud back-up, but with Stone he becomes a 3-stud even if Thunder Boy is sent home/unprepared/made in to a draw. With Thunder Boy, Tommy Harden and a 1-Draw Bullet catcher you're often better off with Stone (despite the penalty) than with a full posse if your opponent hits you with Sun in Yer Eyes, Unprepared, Pistol Whip etc.
I'll second this comment - this is a Legend that needs a specific deck built to support it, but can be powerful when this is done. The card pool is large enough now to overcome the -2GR starting stash that Stone imposes and still have a decent starting posse.