In the FC i am in i am an officer, just below master, and i follow a three strike rule just as i use at my work. We ALWAYS want members having fun. One person having fun and another being berated is NEVER tolerated and counts as one strike. There are certain occasions where people just need to cool off and come back with a clear head. if people are willing to be nice and apologize things will get better for everyone.

Basically i would follow this criteria:

Belittling and swearing at members (if someone lets you know they are offended) 1-3 strikes depending on severity.
Stealing from the FC: Taking items out of chest, etc : Auto Dismissal
Questioning leadership in a irate manner: one strike (have had people ranting rudely or swearing on how our previous master was afk for a while without caring that he had a legit IRL reason.)

In the end it is just a game and people need to fulfill their egos. If you believe someone is causing too much trouble, its best to talk to them. if they dont want to change, let them go.

From what you have said i believe you made the right decision. You were right to teach and cultivate a prospective future leader of you FC. The blame does not lie with you, but with the guy who pushed the limits of decency.