My daughter's school I think gets the balance right. They've kicked kids out for physical attacks, and they tend to have meetings with both families about verbal bullying in order to get to the bottom of the issues and have to kids understand that problems they have with each other need to be discussed and worked out without resorting to making the other person feel bad. But, honestly, beating up on kids smaller than you should be a expellable offense in any shool. Period.
Also, as far as the zero tolerance stuff, from what I've seen anecdotally, schools have used it to weed out kids who would typically be the targets of bullies, especially post-Columbine - thgose who just don't fit in for whatever reason. My niece got kicked out for something similar to your sister (the first one) when she was being bullied for months prior, and some friends of ours were clearly targeted because they were atheists. Again, this is all anecdotal, so take it with a grain of salt.
The goals of public schools are to create a uniform work force that is smart enough to do their jobs, but not good enough critical thinkers to cause trouble - at least that was Foucault's argument and it's hard to argue with a dead French guy.
Overall, I think making treating people with respect as a school policy is hardly "zero tolerance" but seems common sense to me. But then again, I think we live in a time and age where compassion for the individual is just in short supply.
Oh, and for the sociopaths - I think the fact that they are (hopefully) a tiny minority of people, who have something wrong with them and I don't see why they should get to set the agenda on the sorts of behaviors allowed at a public school. Allowing someone to act out cruel tendencies is not the same as someone having them. it's the schools responsibility to be able to deal with those acts and make sure everyone knows that they are unacceptable.